(Updates with comments from regional director in fourth paragraph.)
Oct. 26 (Bloomberg) -- Libya’s economy will contract more than 50 percent in 2011 after eight months of fighting that paralyzed its oil industry, the International Monetary Fund said.
“The conflict has had a severe impact on economic activity heavily dependent on hydrocarbons,” which account for more than 70 percent of output and 95 percent of exports, the fund said today in its Regional Outlook for the Middle East and Central Asia. “International sanctions and consequent denial of access to foreign exchange have limited the ability to finance imports of goods and services, resulting in severe disruptions in the non-hydrocarbon sectors.”
The death last week of Muammar Qaddafi, Libya’s leader for four decades, may end fighting between loyalists and the one- time rebels who now run the country after seizing the capital, Tripoli, in August. Libya has used up about 62 percent of its oil reserves and urgently needs to find alternative sources of income to rebuild its war-torn economy, interim Prime Minister Mahmoud Jibril said last week.
“Oil production can come back to about 700,000 barrels per day,” Masood Ahmed, the fund’s director for the Middle East and Central Asia, said in an interview in Dubai today. “The question is how quickly these resources can be made available, and also how quickly they can spend resources once they’ve addressed issues of strife and sorting out remaining political dimensions.”
Libya, holder of Africa’s biggest crude reserves, “will be able to finance its development and infrastructure and institutional capacity from its own resources,” Ahmed said.
Qaddafi’s defeat follows uprisings in neighboring Tunisia and Egypt earlier this year that ousted long-time autocratic rulers. Tunisia’s economy will remain flat this year while Egypt’s will grow by 1.2 percent, the IMF forecasts.
Libya’s conflict has had “significant spillovers globally and into neighboring countries,” including a shortfall in oil exports and a decrease in remittances sent home by workers from Libya, especially to Tunisia and Egypt, the IMF said. The conflict also played a role in driving tourists and foreign investors away from the region, it said.
Clashes between security forces and anti-government demonstrators continue in Syria and Yemen, where protests to overthrow President Ali Abdullah Saleh are in their ninth month. Yemen’s economy will shrink by 2.5 percent this year and 0.5 percent in 2012, the IMF said.
The economies of oil importers in the Middle East and North Africa will grow by an average 1.4 percent this year and 2.6 percent in 2012, the fund said.
For oil exporters in the six-member Gulf Cooperation Council, rising unemployment among their citizens continues to pose a challenge, the IMF said. About 7 million new jobs were created in the GCC over the past decade, of which fewer than 2 million went to nationals, it said. The number of unemployed GCC citizens could increase by as many as 3 million over the next five years, the IMF said.
“GCC countries could be expected to increase employment by almost 6 million workers during 2010 through 2015,” it said. “On the supply side, more than 4.5 million new nationals will be old enough to work.”
A surge in spending by some GCC oil producers to meet popular demands and ward off unrest means that the break-even oil price they need to finance budgets has risen in some cases by more than $20 a barrel, though the average increase is only $6 a barrel, the IMF said.
--Editors: Ben Holland, Heather Langan.
To contact the reporter on this story: Vivian Salama in Abu Dhabi at firstname.lastname@example.org.
To contact the editor responsible for this story: Louis Meixler in Jerusalem at email@example.com.