Saifaddin Galal
Research Expert North Africa
Key economic indicators of Libya - statistics & facts
Economic growth in Libya has been hindered by political instability and conflict in recent years. During the First (2011) and Second Civil War (2015-2020), the Gross Domestic Product (GDP) largely fluctuated reaching a low of 21.13 billion U.S. dollars in 2002. In 2020, while the political and security situation witnessed a relative improvement due to the ceasefire signed in October, the coronavirus (COVID-19) pandemic caused a severe economic recession, with the GDP sinking by almost 32 percent compared to 2019. However, the economy began to recover in 2022 and was projected to expand further in the following years.
Weak government finances and high inflation
In 2020, the pandemic severely impacted Libya's government finances. Specifically, the global oil crisis caused by the COVID-19 outbreak undermined the local economy, which heavily depends on the hydrocarbon industry. The country’s budget balance contracted strongly in 2020, following the same trend as the public debt. According to estimates, Libya’s government debt to GDP ratio was among the highest worldwide in 2020. The substantial government debt and international sanctions contributed to increasing consumer prices. In 2022, the inflation rate rose to over 4.5 percent, but is forecast to stabilize from 2025 onwards.Excessive reliance on oil and gas
The oil and gas industry represents the main source of revenue in the country. As a member of the OPEC, Libya ranks among the main oil producers in Africa, and its proven crude oil reserves are the largest on the continent. Hydrocarbons dominate the Libyan industrial sector and fuels account for 95 percent of the total merchandise exports. However, the heavy reliance on hydrocarbons, typical of the oil-rich countries in the Middle East and North Africa, is also a threat for the economy. The oil and gas industry is extremely susceptible to fluctuating oil prices and demand. For instance, in 2020, the COVID-19 outbreak determined a sharp decline in oil exports from the country. In addition, the hydrocarbon industry does not require an extensive workforce, which partly explains the high levels of unemployment among Libyans.Still far from an economic shift
Economic diversification is essential for countries that rely heavily on the oil industry. In Libya, attempts to promote sectors other than hydrocarbons have been insufficient. Although it employs the majority of the workforce, the service sector remains small due to the lack of reforms and investments to develop private businesses. Moreover, the contribution of agriculture to the Libyan economy is extremely limited. The small agricultural production is not enough to meet the domestic demand for food, which is instead largely imported. While the scarcity of fertile soil and rainfalls limit agricultural activities in the country, there could be room for further development of the sector. Overall, diversification remains one of the greatest challenges for Libya. The current economic system, characterized by high oil rents, the reliance on the hydrocarbon industry, a large public sector, and government subsidies, will likely be unsustainable in the longer term.
