Lybia - Growth and inflation

The inflation rate in Libya dropped to 1% in June from 12.4 percent in June 2008, the Central Bank of Libya announced last week.

The Libyan economy depends primarily upon revenues from the oil sector, which contributes about 95% of export earnings, about one-quarter of GDP, and 60% of public sector wages. The expected weakness in world hydrocarbon prices throughout 2009 could reduce Libyan government tax income and constrain Libyan economic growth in 2009.

Libya imports around 90 percent of its food and other supplies notably from Europe, where consumer prices have fallen sharply this year amid the global credit crunch.

Real GDP was expected to rise by more than 7 per cent after reaching 6.8 per cent in 2007. However, Libya still faces challenges linked to the duality of its economy. While the hydrocarbon sector allows the country to accumulate large amounts of capital, there are inadequate linkages between the petroleum and non-petroleum sectors.

Substantial revenues from the energy sector coupled with a small population give Libya one of the highest per capita GDPs in Africa, but little of this income flows down to the lower orders of society.

Worthy of note is Libya’s recently launched US$84 billion infrastructure programme. With the labour force increasing at a yearly rate of 3.5 to 4 percent, the generation of employment was also a concern.