Libya’s Economy Shows Resilience and Potential for Prosperity Amid Challenges
Libya's economy shows resilience despite facing low and volatile economic growth. The World Bank estimates a 1.2 percent contraction in Libya's economy for 2022, primarily attributed to a decline in oil production during the first quarter of the year. High unemployment rates of 19.6 percent persist, with over 85 percent of the working population engaged in the public and informal sectors. Inflation has been significantly driven by rising food, housing, and electricity prices. The official Consumer Price Index (CPI) reached 4 percent by the end of 2022, while the Minimum Expenditure Basket (MEB) saw a peak increase of 38 percent in national prices.
On the fiscal front, the Government of National Unity (GNU) faced challenges in securing an approved budget for 2022. Nevertheless, the GNU recorded a fiscal surplus of 2.8 percent of GDP in 2022, a decrease from the 10.6 percent surplus in 2021. This decline was mainly due to increased government expenditure, particularly public wages, which rose by 42 percent.
Libya's challenging transition process has been affecting the economy and society; the country experienced a 50% decline in GDP per capita between 2011 and 2020. Absent the conflict, the economy could have witnessed, on the contrary, a high positive growth of 68 percent over the ten years growth, a possibility that remains attainable and highlights the country's enormous potential.
Since 2011, Libya's social protection system efficiency has significantly declined. As a result, coverage for vulnerable populations has become limited, and labor market outcomes have been negatively impacted. Libya's social protection sector is based on solid legal and institutional foundations and requires policy reforms to enhance its efficiency and effectiveness.
Despite facing significant challenges, Libya has a high potential for economic reconstruction and diversification, backed by considerable financial resources. This potential resides on four pillars: i) achieving a sustainable political agreement for Libya's future, ii) devising a shared vision for economic and social advancement, iii) creating a modern public financial management system for equitable wealth distribution and transparent fiscal policies, iv) and developing a comprehensive social policy that facilitates public administration reform and differentiates between social transfers and public wages. These elements will set the foundation for Libya's prosperous future.
Distributed by APO Group on behalf of The World Bank Group.