IMF: Libya’s economic prospects are favorable for 2003
Libya’s real non-oil gross domestic product (GDP) is projected to expand by about 2.5 percent in 2003, while prices are projected to increase by about three percent, reported the Executive Board of the International Monetary Fund (IMF)’s recently concluded Article IV consultation with the state of Libya.
Based on projected increases in oil prices and production, and a less expansionary fiscal stance, Libya’s economic prospects for 2003 appear favorable, stated an IMF Public Information Notice (PIN). Strong external fiscal and current account surpluses are expected, along with a buildup in official reserves to about 24 months of imports.
The Libyan economy depends heavily on the oil sector and remains largely state controlled and regulated. Real non-oil GDP grew by about three percent and deflation continued with a 9.8 percent decline in the consumer price index (CPI). The external current account shifted to a deficit for the first time since 1998, and gross official reserves decreased slightly to about $13.7 billion.
The fiscal stance remained expansionary in 2002, with the non-oil overall fiscal deficit widening to 32 percent in 2002 from about 29 percent of GDP in 2001. Expenditure growth in 2002 was driven by budgeted capital expenditure growth of 3.2 percent of GDP, mainly on development projects in communications, construction, health, housing, and education.
On the revenue side, oil revenue in Libyan dinar terms was boosted by the large devaluation of the official exchange rate at the beginning of 2002. However, tax revenue decreased and customs revenue stagnated despite a surge in imports, mainly as a result of widespread exemptions granted to public enterprises. The overall consolidated budget position registered a surplus of four percent of GDP.
IMF Directors consider that the main challenge facing the Libyan authorities is generating sufficient growth and employment opportunities to absorb the rapidly growing labor force. They, therefore, welcomed the authorities' commitment to the gradual structural transformation of the economy, consistent with Libya's social system, and the recent steps taken toward liberalization and reducing the role of the state in the economy. However, existing controls and restrictions, as well as subsidies and exemptions, continue to distort economic choices and weigh on growth and employment prospects, especially in the non-oil sector. — (menareport.com)
© 2003 Mena Report (www.menareport.com)