Libya’s economy will contract more than 50 percent in 2011 after eight months of fighting that paralyzed its oil industry, the International Monetary Fund said.
“The conflict has had a severe impact on economic activity heavily dependent on hydrocarbons,” which account for more than 70 percent of output and 95 percent of exports, the fund said today in its Regional Outlook for the Middle East and Central Asia. “International sanctions and consequent denial of access to foreign exchange have limited the ability to finance imports of goods and services, resulting in severe disruptions in the non-hydrocarbon sectors.”
Libya has used up about 62 percent of its oil reserves and urgently needs to find alternative sources of income to rebuild its war-torn economy, interim Prime Minister Mahmoud Jibril said last week.
“Oil production can come back to about 700,000 barrels per day,” Masood Ahmed, the fund’s director for the Middle East and Central Asia, said in an interview in Dubai today.
Libya, holder of Africa’s biggest crude reserves, “will be able to finance its development and infrastructure and institutional capacity from its own resources,” Ahmed said.
Libya’s conflict has had “significant spillovers globally and into neighboring countries,” including a shortfall in oil exports and a decrease in remittances sent home by workers from Libya, especially to Tunisia and Egypt, the IMF said. The conflict also played a role in driving tourists and foreign investors away from the region, it said.
The economies of oil importers in the Middle East and North Africa will grow by an average 1.4 percent this year and 2.6 percent in 2012, the fund said.
For oil exporters in the six-member Gulf Cooperation Council, rising unemployment among their citizens continues to pose a challenge, the IMF said. About 7 million new jobs were created in the GCC over the past decade, of which fewer than 2 million went to nationals, it said. The number of unemployed GCC citizens could increase by as many as 3 million over the next five years, the IMF said.
“GCC countries could be expected to increase employment by almost 6 million workers during 2010 through 2015,” it said. “On the supply side, more than 4.5 million new nationals will be old enough to work.”
A surge in spending by some GCC oil producers to meet popular demands and ward off unrest means that the break-even oil price they need to finance budgets has risen in some cases by more than $20 a barrel, though the average increase is only $6 a barrel, the IMF said.
(Source: Bloomberg Businessweek)
