Libya's economy is still heavily dependent on oil exports. The hydrocarbon sector accounts for more than 75% of GDP, about 98% of budget revenues and 93% of export revenues. The declared production is 1.18 million barrels per day with the possibility of further increase.
The country remains attractive for investment. On January 27, 2023, the National Oil Corporation of Libya and the largest Italian oil and gas company Eni signed an agreement to provide investments to the Libyan corporation in the amount of US $ 8 billion in order to start gas production.
However, the development of the private sector has slowed down, as most of the local market and economic support measures fall on the public sector. Weak governance institutions, an undeveloped financial sector, poor infrastructure and years of isolation due to sanctions have also had a negative impact on the private sector.
Due to the internal political situation in the country, the central bank was divided into two separately functioning bodies: the Central Bank in the west of the country in Tripoli and another in the east of the country. The absence of a unified monetary policy prevents the allocation of funds for capital development projects and their implementation.
In 2021, the country demonstrated high GDP growth rates (28.3%) after almost a 30% drop in 2020. This dynamics is due to the growth of oil production and, as a result, an increase in the balance of trade and balance of payments — the increase in oil and hydrocarbon production led to an increase in budget revenues, and the inflow of currency provided economic growth. According to the IMF forecast, the country's GDP will grow to $43.8 billion in 2023, and by 2027 it will amount to $50.5 billion with a gradually decreasing rate of real GDP growth.
In December 2020, the Central Bank of Libya announced the devaluation of the currency and changed the peg to the US dollar from 1.4 to 4.5 Libyan dinars per US dollar, effective from January 2021. The currency devaluation has kept upward pressure on inflation, given Libya's significant dependence on imports, which accounted for almost half of GDP in 2021.
Thus, the estimated inflation rate for 2022 was 5.5%. According to experts (IMF, Oxford Economics), in the coming years, inflation rates will begin to stabilize — in 2023, inflation will be 4.0–6.6% with a further decrease to 2-3%. Despite the fact that during 2017-2021 there was a wave-like dynamics of changes in GDP per capita, a stable further growth of this indicator is projected to reach 29.9 thousand US dollars by 2027.
