June 6 (Bloomberg) -- The conflict in Libya has caused its economy to implode, dimming growth prospects in a region already reeling from the impact of civil unrest in Egypt and Tunisia, according to a report by four international bodies.
Libya’s economy will probably shrink 19 percent this year, after growing 7.4 percent in 2010, while its inflation rate jumps to 12.1 percent from 4.7 percent, according to the 2011 African Economic Outlook, released in Lisbon today. The nation’s prospects are expected to improve next year, with growth of 16 percent and 5.1 percent inflation.
Rebels trying to end Muammar Qaddafi’s four-decade rule, backed by air strikes from the North Atlantic Treaty Organization, are fighting troops loyal to the Libyan leader. The conflict has left most of the east in opposition hands and curbed oil exports. The North African country has the continent’s largest oil reserves.
Libya “is likely to pay a high price for the conflict which has effectively paralyzed the economy and led to a near halt of Libya’s oil production,” the report said. “While uncertainties persist regarding the duration of the conflict, the country’s oil endowment and international attention to the country are likely to secure a relatively fast recovery once the conflict is over.”
The report was published by the African Development Bank, the Organization for Economic Cooperation and Development, the United Nations Development Program and the UN Economic Commission for Africa. Its release comes ahead of the ADB’s annual general meeting in Portugal’s capital on June 9-10.
The uprising in Libya followed unrest that toppled Egypt’s and Tunisia’s long-standing leaders, sparked by widespread discontent over poor living conditions, rising food prices, corruption and political repression.
Egypt’s economy will probably expand 1.6 percent this year compared with 5.1 percent in 2010, before growth accelerates to 4 percent in 2012, the report said. Tunisia’s economic growth is expected to slow to 1.1 percent this year from 3.7 percent in 2010.
The North African region is likely to grow less than 1 percent, pulling Africa’s growth rate down to 3.7 percent this year from 4.9 percent, the report said.
“The events in North Africa have had a major impact on foreign direct investment,” OECD economist Jean-Phillipe Stijns, one of the report’s authors, said by phone from Paris. “It’s too early to give precise numbers. Next year should see some form of stabilization. Growth should return to North Africa. The continent as a whole should bounce back to growth rates in the order of 5.8 percent.”
South Africa, which has Africa’s largest economy, will probably grow 3.6 percent this year and 4.3 percent in 2012. The forecasts are more optimistic than those of the country’s National Treasury, which in February predicted growth of 3.4 percent and 4.1 percent.
Nigeria, Africa’s top oil producer, may see growth slow to 6.9 percent this year from 8.1 percent in 2010, the report said.
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