By Hadi Fornaji.
Tripoli 14 November:
The International Monetary Fund has . . .[restrict]expressed generally positive views about the direction of the Libyan economy.
Though working from June figures, which made the Washington-based economists think that Libya would not return to its pre-revolution hydrocarbon output until next year, when in fact the country hit that 1.6 million barrels daily this September, the report is generally upbeat.
As part of its biannual regional economic outlook, the IMF predicts a record-breaking 2012 GDP growth of 120 percent for Libya, coming after last year’s radical 60 percent contraction. If the security situation improves as predicted, the IMF believes that the economy will remain robust, with growth for next year of 17 percent, easing thereafter to seven percent from 2014-2017.
Given no radical change in oil prices, it says Libya can expect a fiscal surplus this year, equivalent to 19 percent of GDP, while the current account surplus rises to 22 percent of GDP. Inflation, which the IMF estimates was running at 16 percent last year, will, it expects, ease back to ten percent this year and drop to just one percent next year. This sharp decline will come about, “ despite upward pressure on domestic prices arising from supply bottlenecks in housing and transportation.”
It warns, however, that if the global economy continues to struggle with recovery, oil and gas prices could fall, which would present the hydrocarbon-dependent Lbyan economy with challenges.
The IMF speaks of concern over security and political stability, but majors on the government’s need to exercise fiscal discipline, while maintaining macroeconomic stability.
“As a short-term response to the aspirations of the revolution, the interim government raised wages and subsidies notes the report. “Although Libya can afford elevated levels of current expenditure during a transitional period, the increase in wages and subsidies is eroding the country’s fiscal buffers and undermining prospects for fiscal sustainability”.
The IMF also warns that Libya must tackle a whole range of pressing issues from improved education, rebuilding infrastructure, developing a financial market, cutting economic dependence on oil and gas production and putting in place an efficient social security net.
To this end, it says: “The country will need to establish a governance framework to improve transparency and accountability, to better manage its resource wealth, and help promote private sector-led economic development.”