World Bank: Libya’s Challenges Include Heavy Dependence on Oil, Declining Productivity, and Deteriorating Quality of Health and Education… Here Are the Details

The World Bank reported today, Wednesday, that Libya’s economy is expected to stabilize following an agreement to resolve the country’s Central Bank crisis, which led to a significant rebound in oil production. However, despite recent progress, Libya’s GDP is expected to shrink by 2.7% by the end of 2024.

According to the latest World Bank report on Libya’s economy, economic expectations remain dependent on sustained political stability and strategic efforts to diversify the economy beyond hydrocarbons.

The Bank noted that, during the first ten months of 2024, oil production shrank by 8.5% due to the crisis at the Central Bank of Libya, dropping from 1.17 million barrels per day to 0.54 million barrels per day in September. After the crisis, production rebounded to 1.3 million barrels per day by the end of October, while oil prices remained around $80 per barrel, at the same level as 2023, amidst reduced global demand, particularly from China, and increasing regional geopolitical risks.

The report also discusses the economic trends in Libya over the past decade, highlighting the severe impacts of ongoing instability. The losses are estimated at about $600 billion over ten years, based on the 2015 fixed dollar rate. Had it not been for the conflict, Libya’s GDP in 2023 would have been 74% higher. In addition to instability, key challenges include heavy reliance on oil, lack of diversification, low productivity, and the deterioration of health and education quality.

Ahmad Mustafa, Director of the Maghreb and Malta Region at the World Bank, said Libya faces the challenge of diversifying its economy and reducing its dependence on hydrocarbons. Stability and improved governance will be key to Libya’s economic recovery, as evidenced by the significant economic losses caused by instability in recent years.

Furthermore, by addressing the risks posed by climate events, Libya can protect its infrastructure, ensure the delivery of services, and maintain financial stability, paving the way for a resilient and prosperous future.

The World Bank emphasized that Libya’s economic outlook is heavily reliant on the oil and gas sector, which dominates GDP, government revenues, and exports. Oil production is expected to recover to 1.2 million barrels per day in 2025 and 1.3 million barrels per day in 2026, boosting GDP growth to 9.6% in 2025 and 8.4% in 2026. Non-oil GDP growth is expected to be 1.8% by the end of 2024, driven by consumption, averaging around 9% during 2025-2026. Despite lower oil revenues in 2024, fiscal and external balances are expected to show surpluses of 1.7% and 4.1% of GDP, respectively, due to reduced spending and imports.

The Bank further noted that the country’s priorities include strengthening security, governance, and stability. With GDP per capita reaching $7,570 in 2023, Libya is considered a high-middle-income country. By prioritizing non-oil sectors and encouraging private-sector-led growth, Libya can unlock high-value employment opportunities and enhance development indicators, thus improving the lives of citizens and aligning with the global shift toward clean energy, according to the World Bank.