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- GDP (PPP):
- $77.4 billion
- 104.5% growth
- -3.7% 5-year compound annual growth
- $12,066 per capita
- Inflation (CPI):
- FDI Inflow:
Numerical grading of Libya’s overall economic freedom remains suspended in the 2014 Index because of political turmoil that has resulted in civil unrest and the deteriorating quality of publicly available economic statistics. Those facets of economic freedom for which data are still available have been individually scored. As a “repressed” economy with a score of 35.9, Libya was ranked last in the Middle East/North Africa region when it was last graded in the 2012 Index.
Before the downfall of the Qadhafi regime in 2011, the weak rule of law and systemic corruption had largely marginalized private-sector activity in the formal economy. Libya, overly dependent on the oil sector, had undertaken only limited reforms to diversify its economy.
Libya’s near-term challenge is to ensure a peaceful political transition while maintaining macroeconomic stability. The government needs to stabilize the economic environment and implement much-needed reforms following the revolution. The economic infrastructure was significantly degraded during the civil war, and economic uncertainty remains very high as the weak interim government struggles to restore the rule of law and establish a new system of effective governance.
After the 2011 overthrow of dictator Muammar Qadhafi by rebels backed by the U.N. Security Council and a NATO bombing campaign, elections were held in July 2012. The new government led by President Mohammed Magarief and Prime Minister Ali Zeidan has struggled to rein in fiercely independent militias fighting for control of territory and resources. Oil and natural gas provide about 80 percent of GDP, 95 percent of export revenues, and 99 percent of government revenues. Economic recovery, which began in 2012, has been driven by the energy sector, which is producing at pre-war levels. The government faces major challenges in disarming and demobilizing militias, imposing the rule of law, and reforming the state-dominated socialist economy.
Corruption has long been pervasive in the private sector and in government. The fall of the Qadhafi regime raised some hopes that the level of graft would decline, but oil interests, foreign governments, smuggling groups, and armed militias often still wield undue influence, especially in the South, and opportunities for corruption abound in the absence of effective fiscal, judicial, and commercial institutions.
The top individual income tax rate has fallen to 10 percent, and the top corporate tax rate remains 20 percent. A 4 percent surcharge for the “Jihad” fund is applied to corporations. Oil revenues have helped to bolster public finances even though taxation has been enforced only erratically since the beginning of 2011. The overall tax burden is about 1 percent of GDP. Public expenditures are around 67 percent of GDP. Libya has no public debt.
Regulatory efficiency is very poor, and only limited private entrepreneurial activity has been successful. Application of regulations is inconsistent and non-transparent. The labor market remains destabilized, and the informal sector is large. Increased spending on public-sector wages adds to inflationary pressure, which the government attempts to mitigate through extensive (and price-distorting) food, fuel, and electricity subsidies.
Libya has a 0 percent average tariff rate, but civil unrest is a significant deterrent to international trade and investment. The financial system continues to function relatively normally, but limited access to financing has severely impeded any meaningful private business development. Commercial banking has been dominated by four main banks.