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Background

Libya has struggled to rebuild state institutions since the ouster and subsequent death of former leader Muammar al-Qaddafi in October 2011. Libyas transitional government ceded authority to the newly elected General National Congress (GNC) in July 2012, but the GNC faced numerous challenges over the next two years, including the September 2012 attack by Islamist militants on the U.S. consulate in Benghazi and the spread of the Islamic State and other armed groups throughout the country.

In May 2014, Haftar launched Operation Dignity, a campaign conducted by the LNA to attack Islamist militant groups across eastern Libya, including in Benghazi. To counter this movement, Islamist militants and armed groupsincluding Ansar al-Sharia formed a coalition called Libya Dawn. Eventually, fighting broke out at Tripolis international airport between the Libya Dawn coalition, which controlled Tripoli and much of western Libya, and the Dignity coalition, which controlled parts of Cyrenaica and Benghazi in eastern Libya, and a civil war emerged.

The battle for control over Libya crosses tribal, regional, political, and even religious lines. Each coalition has created governing institutions and named military chiefsand each has faced internal fragmentation and division.In an effort to find a resolution to the conflict and create a unity government, then-UN Special Envoy to Libya Bernandino Leon, followed by Martin Kobler, facilitated a series of talks between the Tobruk-based HoR and the Tripoli-based GNC. The talks resulted in the creation of Libyan Political Agreement and the UN-supported GNA. The GNA has continued to face obstacles to creating a stable, unified government in Libya.

Taking advantage of the widespread political instability, armed Islamist groups, including Ansar al-Shariathe terrorist group allegedly responsible for the attack on the U.S. consulate in 2012and the Islamic State, have used the country as a hub to coordinate broader regional violence, further complicating efforts to create a unity government.

As a result of the continued fighting, the UN Refugee Agency estimates that more than 217,000 people have been internally displaced and approximately 1.3 million people are in need of humanitarian assistance in Libya.

Concerns

The United States, European allies, and the United Nations continued to express concern over the permanent fracture of Libya as armed militant groups have tried to divide the country along political and tribal lines. Moreover, in the absence of a primary governing body, migration and human trafficking have remained problematic.

A member of the Organization for Petroleum Exporting Companies (OPEC), Libyan oil revenues constitute more than 80 percent of Libyas total exports. As armed groups continue to fight over oil fields and restrict production, concerns have also increased over whether the country will be able to support itself economically.

Recent Developments

The UN-backed Government of National Accord (GNA) declared a state of emergency in Libyas capital city of Tripoli in September 2018, less than a week after a UN cease-fire went into effect. Attempts to create a unity government have met with limited success as the House of Representatives (HoR)based in Libyas east and a key supporter of Libyan National Army's (LNA)leader General Khalifa Haftarand the GNA compete for power. Both governing bodies have created their own central banks and have consolidated control over oil fields. In May 2018, French President Emmanuel Macron convened a meeting between Haftar, GNA leader Fayez Seraj, and parliamentary leaders to discuss an end to the conflict and future elections. Though the rival groups agreed to hold elections in December 2018, UN Special Envoy to Libya Ghassan Salame said elections would be postponed until the spring of 2019.

Rival armed groups, including militia groups loyal to the LNAs Haftara Tobruk-backed former Qaddafi loyalistand the GNAs security forceshave continued to fight over access to and control of Libyas National Oil Corporation (NOC), as well as regional oil fields. In December 2018, the NOC closed Libyas largest oil field, El Sharara, due to security concerns; the LNA has since declared that the field is secure and ready to resume operations, but NOC Chairman Mustafa Sanalla refused to restart production in February 2019, stating that the field was still unsafe due to militant activity.

The presence of the self-proclaimed Islamic State, which established a foothold in the country in February 2015 and quickly gained control of the coastal city of Sirteformerly the groups most significant stronghold outside of Syria and Iraqhas further complicated the struggle for control. In July 2018, Haftar announced that the LNA had recaptured the city of Derna, the last outpost of the Islamic State militants in eastern Libya. However, the group continues to operate throughout the country and conducted an attack on Libyas foreign ministry in December 2018.

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Instability in Libya | Global Conflict Tracker

Libya entered 2021 as a divided nation aspiring for recovery and healing. With intensifying conflict and a blockade of oil terminals and fields, the economy registered one of the worst performances in recent records for the most part of 2020. Starting in mid-September, a rapprochement between political/military factions brought much-needed relief to the economy, capping the GDP plunge at 31.3%, annually. The election of a unity government in early 2021 has rekindled hope, but the reunification agenda faces formidable challenges ahead.

For the most part of 2020, the performance of the Libyan economy was the worst in recent records. Even with the rebounding oil proceeds in the last quarter, the economy could not recover its earlier losses, and registered a 31.3% real decrease in GDP. On average, oil production in 2020 is estimated at 405,000 barrels per day, roughly a third of actual output in 2019.

With looming uncertainties, projecting future economic trends is a daunting task. However, With major maintenance problems still pending, oil production is projected to reach 1.1 million barrel per day (MBD) in 2021. This would lead to a rebound in real GDP growth, to 67% in 2021. In terms of level of GDP, the economy would still be 23% smaller than that in 2010, the year prior to the start of the conflict.

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Libya's Economic Update April 2021 - World Bank

Libya made significant progress towards ending its decade-long conflict and moving towards reunification in 2021. This resulted in a strong rebound of oil production and economic activity, and a consequent upswing in fiscal, trade, and current account balances. Nevertheless, households still struggle with food insecurity, poverty, and poor public service delivery. Challenges with organizing national elections for December 2021 raise the specter of a deteriorating political and security situation which would threaten progress towards peace and recovery.

Following a massive contraction of the hydrocarbon sector in 2020, driven by intensifying conflict and a blockade of oil terminals and fields, the sector, and in turn the Libyan economy overall, are witnessing a significant rebound. Oil production has averaged 1.2 mb/d during the first half of 2021, compared to an average of 0.3 mb/d during the first 9 months of 2020 and 0.9 mb/d during the fourth quarter of the year.

Should the political process progress positively and the security situation remain stable, Libya will continue its path of economic recovery. In the coming months, if presidential and parliamentary elections and the reunification of public institutions proceed, and oil production persists, . In turn, trade and current account balances are projected to record double digit surpluses as a share of GDP. The fiscal balance may record a surplus, as well, given the strong rebound of oil production and exports and following the devaluation of the currency (which has reduced the cost of financing public sector salaries and goods and services using dollar-denominated oil revenues). This, however, will depend on whether there are any major deviations in spending patterns compared to the first half of the year.

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Libya's Economic Update October 2021 - World Bank

Since the delay of national elections in December 2021, political and security tensions and oil production disruptions have escalated. The confirmation of a new cabinet by the House of Representatives has returned Libya to a state of institutional division. While soaring global oil prices will have a positive impact on growth and fiscal and external surpluses, this hinges on the persistence of oil production. Meanwhile the population faces increasing food insecurity as global wheat prices rise.

While official national accounts data have been unavailable for much of the conflict period, rough estimates of GDP can be made using data on night-time lights, oil production, and government spending. (average of 1.2 million barrels per day (mb/d) compared to 0.4 mb/d in 2020). However, since mid-December 2021, there have been multiple production disruptions due to weather-induced port closures, infrastructure maintenance issues, and shutdowns by armed groups. Oil production in January 2022 recorded its lowest level since October 2020 (1.08 mb/d).

It is impossible to forecast economic outcomes with any degree of confidence due to the high level of uncertainty surrounding political and security developments. If oil production and exports continue without major extended disruptions, Libya will benefit from soaring global oil prices which will translate into higher fiscal revenues and inflow of hard currency. This will positively affect the trade, current account, and fiscal balances. Libya may face short-term wheat supply disruptions, higher wheat prices, and in turn higher inflation and lower consumption.

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Libya's Economic Update April 2022 - World Bank

New World Bank report details how the countrys trajectory for economic recovery will remain linked to the security and political environment; implementing urgent reforms will increase the likelihood of a successful resolution and recovery.

Tunis, April 22, 2021 The Libyan economy faces major challenges, including recurring disruptions to the oil and gas sector, the fragmentation of state institutions, and ongoing conflict.

The new spring 2021 edition of the Libya Economic Monitor details how, for most of 2020, the performance of the Libyan economy was the worst in recent record. A 9-month blockade that began in January 2020 cut the countrys crude oil to less than one-sixth of 2019 valuesthe worst monthly performance since the beginning of the recent conflict.

The blockade was debilitating for Libyas acutely undiversified economy, which relies on oil and gas for over 60% of aggregate economic output and over 90% of both fiscal revenue and merchandise exports. Fiscal revenues lost from the blockade amounted to around US$11 billion for the year, according to the Central Bank in Tripoli. These problems were exacerbated by the COVID-19 pandemic, which inflicted further economic and social dislocation on the war-torn country, which already suffered from a degraded healthcare system. Overall, the Libyan GDP plunged by 2020 despite resuming oil production in the last quarter.

Libya faces enormous economic challenges and desperately needs unified institutions, good governance, strong political will, and long overdue reforms, saidJesko Hentschel, World Bank Country Director for the Maghreb and Malta. The Libyan people have gone through so many tribulations. The security and political environments have seen signs of improvement lately. The road ahead will not be smooth, but it provides hope for peace, stability, and development.

The economic monitor estimates that the Libyan economy will partially recover in 2021 from the slump in 2020. GDP growth is forecast at 67% in 2021 in real terms. Oil and gas output will remain the main driver of economic growth in 2021. Higher international oil prices will help support the overall rebound in oil output, filtering through stronger government consumption and investment, and in turn supporting a recovery in private consumption. Growth in the non-oil sector will remain subdued, impeded by ongoing conflict; poor provision of services, including power; and the lingering effects of the COVID-19 pandemic.

The agenda for social policy and institutional reform is full and needs urgent attention. Besides peace and stability, the country needs urgent infrastructure investments and social assistance to vulnerable groups, including a more rapid and orderly vaccine rollout. With diminishing conflict and improving security conditions in large parts of the country, the Libyan government can focus on improving the provision of public services and creating conditions for a quick recovery in the non-oil sector.

The World Bank is committed to supporting Libya with technical assistance and analytical services, as well as Trust Fund and grant financing. The Banks priorities, set out in the Country Engagement Note (CEN) in February 2019, consist of two pillars: Accelerating Economic Recovery and Restoring Basic Service Delivery. The program focuses on actions that will concretely improve lives, with the World Bank Group developing its knowledge base for longer-term engagement with Libya through Advisory Services and Analytics (ASA) as well.

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Libya is Aspiring for Recovery and Healing, but Challenges Abound