Country Report - Zawya

16 Libya
Current-account surplus
narrows sharply
The impact of the global economic downturn is fully reflected in data recently
released by the Central Bank of Libya showing Libya's external position. With
oil and gas exports constituting some 96.4% of total exports, Libya's trade
surplus was severely dented in 2009, as both global demand and prices
slumped. Total export revenue fell from a record LD76bn (US$59bn) in 2008 to
LD47bn last year; a decline of 39%. Conversely, imports continued to grow.
Since Libya's reintegration into the global community, its demand for foreign
manufactured goods has grown unabated, as the access to global markets has
exposed the country's shortcomings in terms of manufacturing output. It will
take some years for Libya to develop a viable manufacturing base of its own;
until that point, Libya's demand for imported goods will continue to rise. As a
result of the shift in trade flows, Libya's trade surplus narrowed markedly,
declining to LD19bn in 2009, down from LD49bn the previous year.
Rising consumption and demand for foreign manufactures will also take its toll
on Libya's non-merchandise account in the form of services debits. These are
constituted chiefly of import-related services costs—such as insurance and
freight—and so, as Libya's imports continue to rise, so will the ancillary services
payments. Just as Libya's imports have risen by 75% over the past four years, so
its services bill has almost doubled.
Current account
(LD m)
2006 2007 2008 2009
Exports 51,552 63,181 75,959 46,630
Oil & gas 50,269 61,706 74,182 44,932
Imports -15,674 -22,371 -26,807 -27,623
Trade balance 35,878 40,810 49,152 19,007
Services -2,751 -3,231 -4,672 -5,529
Credits 145 247 273 824
Debits -2,896 -3,478 -4,945 -6,352
Income 1,506 1,838 1,938 1,120
Credits 4,014 5,482 4,885 2,515
Debits -2,508 -3,644 -2,947 -1,395
Current transfers 435 -276 -1,285 -1,971
Credits 1,603 686 -94 -264
Debits -1,167 -962 -1,191 -1,707
Non-merchandise balance -810 -1,669 -4,019 -6,379
Current account balance 35,068 39,140 45,133 12,628
Source: Central Bank of Libya.
The effect of reduced oil export earnings is that oil companies operating in
Libya post reduced profits and so repatriate fewer funds to their home
countries. This is reflected in the income account, which shows a 52% fall in
debits. Income credits, most probably representing interest accrued on Libyan
assets overseas also showed a decline in 2009, as global interest rates fell as the
credit crunch set in. Conversely, current transfers debits—made up mostly of
remittances paid by immigrant workers back to their countries of origin—rose
markedly as Libya's project development programme continued apace, and
continued to attract increasing numbers of expatriate labourers.
Country Report August 2010 www.eiu.com © The Economist Intelligence Unit Limited 2010