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Libya Country Risk Report Q1 2020

Libya Country Risk Report Q1 2020

The battle for Tripoli between the two factions fighting for control of Libya shows little sign of breaking out of its present stalemate. The Libyan National Army (LNA) does not appear likely to give up its attempts to dislodge the Government of National Accord (GNA) from its main stronghold in the country, but manpower limitations and a unified enemy will hamper its ability to do so. Continued foreign backing for each side will also contribute to prolonging the stalemate. That said, a shift in foreign support presents the biggest risk to our view of continued stalemate, with the recent US withdrawal of troops from Syria serving as an example of what an unpredictable change in foreign strategy can have on a conflict.

At Fitch Solutions, we expect Libyan real GDP growth to slow over the next several years, from an estimated 14.5% y-o-y in 2018 to 4.4% and 4.0% in 2019 and 2020 respectively. The forecast slowdown is primarily due a weak outlook for oil output: continued instability will likely restrict investment into production capacity expansion and also keep risks of outages from sporadic militant attacks elevated.

We believe that Libya's budget balance will fall to a deficit of 14.7% of GDP in 2019 and 31.5% of GDP in 2020, compared to a surplus of 22.5% in 2018. We at Fitch Solutions do not view the current fiscal trajectory as sustainable despite official figures showing larges surpluses over recent quarters. Actual spending is likely far higher than official figures suggest, and we believe that spending pressures will continue to build in the near term. Oil revenues, meanwhile, are likely to decline amid falling global energy prices and only weak production growth.

Key Risks

Libya's combination of oil wealth, tribal divisions, weak-to-non-existent institutions and security vacuum portend significant instability and potential for a return to full-blown civil war over the coming years.

We highlight major downside risks to oil output – and by extension, headline growth – should the ongoing conflict between western- and eastern-based authorities escalate further.

A failure to create sufficient employment opportunities within the non-oil economy poses a clear risk to social stability given Libya's burgeoning youth population.


Executive Summary
Core Views
Key Risks
Country Risk Summary
Economic Risk Index
Political Risk Index
SWOT
Economic – SWOT Analysis
Political – SWOT Analysis
Economic Outlook
Economic Growth Outlook
Libya To See Slower Growth, Rising Macroeconomic Instability Risks In Quarters Ahead
Fiscal Policy And Public Debt Outlook
Libya Budget Balance To Turn Deeply Negative After Recent Surpluses
10-Year Forecast
The Libyan Economy To 2028
Robust Long-Term Growth Outlook For Libya Masks Structural Weaknesses, Political Risks
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Political Outlook
Domestic Politics
Libya: Military Impasse In Tripoli To Persist But Foreign Shifts Present Risks
Long-Term Political Outlook
Fragile Federalised State To Emerge
Global Macro Outlook
Manufacturing Weakness And Rising Political Risk To Weigh On Growth
TABLE: GLOBAL MACROECONOMIC FORECASTS (2018-2023)
TABLE: DEVELOPED MARKETS – REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS – REAL GDP GROWTH, % y-o-y
Index Tables
TABLE: LIBYA – MACROECONOMIC DATA AND FORECASTS

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