According to the World Bank’s latest Economic Monitor for Libya, released yesterday, Libya’s economy showed promising signs of recovery in 2024 and remained resilient despite challenges arising from its reliance on hydrocarbons and ongoing political and security-related instability.
The report says Libya’s economy contracted by 0.6 percent, primarily driven by a 6 percent decline in oil GDP, influenced by political and institutional disruptions stemming from the Central Bank of Libya (CBL) crisis in August. However, non-oil GDP grew by 7.5 percent, driven by strong private and public consumption, partially offsetting the decline.
This performance underscores the reliance on the oil sector and the need for structural reforms to boost non-oil sectors and reduce hydrocarbon volatility while also addressing political instability and improving governance, the report notes.
Looking ahead to 2025, Libya’s economy is expected to rebound, primarily by the expansion of oil sector activities. Oil production is projected to average 1.3 million barrels per day, surpassing its ten-year historical average and marking a 17.4 percent increase from 2024. Consequently, GDP is anticipated to grow by 12.3 percent, and non-oil GDP growth is expected to remain around 5.7 percent, supported by consumption and exports, but is projected to slow to 4 percent in the medium term.
However, the outlook is clouded by uncertainty, while increased political stability would provide significant benefits for the Libyan economy and population. At the same time, energy prices are dependent on global growth prospects and future OPEC+ production levels.
“Libya is on a path of economic improvement, and achieving political consensus on transparent and efficient management of the country’s oil wealth would significantly contribute to further stabilizing the country and enhancing the well-being of its citizens,” said Ahmadou Moustapha Ndiaye, Division Director for the Maghreb and Malta at the World Bank. “In the medium term, the main economic challenge remains diversifying the economy and reducing dependence on hydrocarbons by promoting private sector-led growth and job creation.”
The Libya Economic Monitor features a special chapter, “Redefining the Role of State-Owned Enterprises in Libya,” which explores an extensive network of nearly 190 state-owned enterprises (SOEs) across strategic sectors, including oil, finance, and utilities, highlighting their significant impact on fiscal sustainability and private sector growth.
With only limited data available, the analysis draws attention to the substantial fiscal challenges, inefficiencies, and market imbalances associated with the prevalence of SOEs across Libya. These challenges are particularly evident in sectors such as infrastructure and banking, which are characterized by persistent losses and overstaffing.
This state dominance crowds out the private sector, prevents innovation, and limits competition – leaving the country with an economy heavily dependent on hydrocarbons. International experience shows that reforms such as enhancing state oversight, liberalizing competitive sectors, and fostering private investment through public-private frameworks can reposition the state as a regulator and promote private-sector-led growth and diversification.
Libya: Leveling the Playing Field Towards Private Sector Growth
