Libya flag Libya: Economic and Political Overview

The economic context of Libya

Economic Indicators

Libya's economy is almost entirely dependent on oil and gas exports, which account for approximately 95% of exports and government revenue. In 2020, the economy experienced a significant contraction due to an oil blockade and a decline in oil prices. This led to widening external and fiscal deficits, along with decreasing foreign exchange reserves. However, more recently, a rebound in oil prices and the resumption of oil production have resulted in budget and current account surpluses in both 2021 and 2022. Gross domestic product, closely linked to oil production, remained volatile throughout this period. According to the latest IMF estimates, GDP growth reached 12.5% in 2023 and should record increases of 7.5% and 6.9% in 2024 and 2025, respectively, although risks are tilted to the downside.

Since the revolution, there have been significant fluctuations in oil production and revenues. Despite these challenges, the Central Bank of Libya (CBL) has successfully maintained a substantial stock of international reserves. This has been achieved through a combination of a fixed exchange rate, capital controls, and temporary arrangements. Notably, Libya does not have any public debt and relies on monetary financing to cover deficits during years when oil revenues are insufficient to meet expenditures. Government spending is largely allocated to public sector salaries, with roughly 2.2 million people, accounting for one-third of the population, nominally employed by the public sector. Higher oil prices, increased production, and improvements in the security situation bolstered revenue in both 2021 and 2022. This positive trend more than offset the impact of removing a tax on foreign exchange transactions following the devaluation. Consequently, there were limited capital spending and fiscal surpluses in both years, amounting to USD 4.4 billion in 2021 and USD 6.4 billion in 2022 (IMF). Inflation has risen from 1.5% in 2020 to 4.5% in 2022, largely due to rising global food-price inflation, and was estimated at 3.4% in 2023 by the IMF.

Continued inflation and low oil production exacerbated poverty in a country already ravaged by civil war and repeated terrorist attacks. The Tripoli government has implemented an active policy of job creation, especially in the public sector, but, according to the Ministry of Labor, the unemployment rate reaches 20%, and about half of all young people and a quarter of women remain without employment.

 
Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 37.8040.1943.9546.3547.77
GDP (Constant Prices, Annual % Change) -9.612.57.56.94.2
GDP per Capita (USD) 5,5775,8726,3576,6396,774
General Government Gross Debt (in % of GDP) 0.00.00.00.00.0
Inflation Rate (%) n/a3.42.92.92.9
Current Account (billions USD) 12.428.5411.6312.4810.87
Current Account (in % of GDP) 32.921.326.526.922.8

Source: IMF – World Economic Outlook Database, October 2021

Main Sectors of Industry

Libya's 6.7 million population includes a workforce of 2.3 million. Agriculture's share in Libya's economy is negligible, accounting for 1.6% of GDP and employing 9% of the workforce (World Bank). Main products include wheat, barley, olives, dates, citrus, vegetables, peanuts, soybeans, and cattle. Arid climate conditions and the poor quality of the soil severely limit agricultural production. The primary limitation on agricultural production is the landscape, with only approximately 12% of the total 15.4 million hectares being arable. While 470,000 hectares are deemed suitable for irrigation, only around 240,000 hectares are presently irrigated, primarily due to apprehensions regarding the depletion of underground water sources. Cereal crops are grown in coastal regions, where rainfed production or cropping with supplemental irrigation is feasible, as well as in certain arid areas in the south, under complete irrigation.

Industry is the backbone of the Libyan economy because of the strong petrochemical industry. It accounts for 80.3% of GDP, employing 23% of the active population (World Bank). Production includes petroleum, petrochemicals, aluminium, iron, steel, food processing, textiles, handicrafts, and cement. Manufacturing is underdeveloped (3% of GDP). Although the Libyan petrochemical industry, especially the country's petroleum exports, were negatively impacted by the pandemic and the drop of oil prices, the sector showed signs of recovery: Libya's state-owned National Oil Corporation (NOC) announced that the country had extracted over 432 million barrels of crude oil in 2023. Additionally, NOC reported production figures for other petroleum-related products, including nearly 1.24 billion cubic meters of natural gas, almost 2.43 million tonnes of condensates, almost 6.17 million tonnes of petroleum products, and 682,595 tonnes of petrochemical products for the same year.

Services account for 25.2% of GDP and its share in total employment stands at 68% (World Bank). Although this is the second-largest sector in Libya, significant industries, such as tourism and retail, are significantly underdeveloped. Financial services and transportation, however, account for a significant part of the service sector. According to the IMF, as of 2023, Libya's banking sector is described as rudimentary. The country hosts 20 banks, with their combined assets totaling around LYD 143 billion. Loans and credit facilities make up less than 15% of the total assets in the banking sector, while the majority, approximately 60%, consists of balances held at the Central Bank of Libya (CBL).

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 16.3 19.3 64.4
Value Added (in % of GDP) 1.6 80.3 25.5
Value Added (Annual % Change) 10.0 -9.9 15.0

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

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Business environment ranking

Definition:

The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

Score:
3.44/10
World Rank:
81/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024

 

Country Risk

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Sources of General Economic Information

Ministries
Ministry of Finance (in Arabic)
Ministry of Economy (in Arabic)
Ministry of Foreign Affairs (in Arabic)
Statistical Office
Bureau of Statistics and Census Libya (in Arabic)
Central Bank
Central Bank of Libya
Stock Exchange
Libyan Stock Exchange
Economic Portals
General portal
 

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Latest Update: May 2024