WASHINGTON: Economic activity in Libya is likely to rebound this year as the country rebuilds from civil war and oil production increases to levels last seen during Muammar Gaddafi's rule, the International Monetary Fund said on Tuesday.
In a report on Libya's economy conducted by an IMF mission in May but published only now, the Fund forecast growth will skyrocket 116.6 percent this year, following a contraction of 60 percent in 2011. Growth next year is expected to ease to 16.5 percent and 13.2 percent in 2014, the IMF added.
Such impressive rebounds in growth are not unusual in countries emerging from conflict, as the government pours money into rebuilding projects and pent-up private demand boosts spending.
While Libya's government can afford the current high rates of spending, over the longer term it is not sustainable and will push the budget into deficit from 2015, the IMF estimated.
"A more thorough analysis of sustainability based on the present value of financial assets and future oil extraction indicates that, from 2012, public spending will exceed the sustainable, long-term level by over 10 percent of GDP," the IMF added.
The IMF warned that continued political uncertainty, insecurity and the possibility of a drop in global oil and gas prices were risks to Libya's outlook.
The oil price at which Libya's budget is balanced has increased to $91 per barrel in 2012 from $58 a barrel in 2010, and is set to exceed $100 a barrel from 2013, the IMF said.
A deeper crisis in the euro zone and sharper slowdown in the world economy could push global oil prices lower, which would be pose challenges for Libya's oil dependent economy, the IMF added.
As Libya's imports return to normal, consumer price inflation should be contained at 10 percent despite pressure on prices from supply bottlenecks in housing and transportation, the IMF added.
The fund said, however, that a drop in the country's high level of unemployment is not likely without reforms.
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