The world Bank issued a detailed report stressing that the Libyan economy has recently been hit by four overlapping shocks: an intensifying conflict that suffocates economic activity, the closure of oil fields that puts the country’s major income-generating activity largely on hold, decreasing oil prices that reduce income from oil production in surviving fields, and the COVID-19 pandemic which threatens to further suppress the economy.
According to the report that has been issued before lifting the oil blockade, the attack on Tripoli in early 2019 and the blockade of the country’s major oil ports and terminals in January 2020 generated the most serious political, economic, and humanitarian crisis faced by Libya since 2011.
“The economic impact was already felt in 2019 as real GDP growth slowed sharply to 2.5 percent, down from what seemed a promising steady recovery during 2017–18, with a record growth performance of 20.8 percent on average. Worse yet, Libya is expected to suffer from a deep recession in 2020.” The World Bank stated.
At the same time, after many years of high inflation, prices started to recede in 2019 because of falling parallel market exchange rate premia driven by concomitant actions by the government and the Central Bank of Libya (CBL), establishing a fee on hard currency transactions (183 %) while easing access to foreign exchange (forex).
The report noted that the Libyan dinar (LD) continues to suffer in the parallel market because of political uncertainties and macroeconomic instability. In the first two quarters of 2020, the LD in the parallel market lost 54 percent of its value, following the forex restrictions implemented by the CBL with increasing uncertainty surrounding the macroeconomic framework
” The adopted budget for 2020 partially reflects this dire situation, with a large forecasted deficit, the highest in recent years. Likewise, the current account is expected to run astronomic deficits in 2020–21. Consequently, reserves will be further declining this year. ” the report added.