Libya economy and political

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Libya economy and political

  1. 1. Libya Economy and Political Risk Tier Dr Yousef Elshrek
  2. 2. • The Country Risk Tier (CRT) reflects A.M. Best’s assessment of three categories of risk: Economic, Political and Financial System Risk. • Libya is a CRT-5 country and has very high levels of political, economic and financial system risk • Libya’s economy remains heavily dependent on oil. • The Libyan hydrocarbon industry accounts for more than 95% of merchandise exports, 80% of government revenues and more than half of gross domestic product. • Political upheaval and civil war in Libya began in February 2011. • The removal of Muammar al-Qadhafi in August of 2011 was followed by the newly elected General National Congress which is attempting to establish a new system of governance, a revised constitution and provide leadership and direction.
  3. 3. • Economic Risk: Very High • Libya experienced an extremely sharp contraction of 62% in economic activity in 2011 as the political revolution and civil war disrupted all forms of business activity, including oil production. • The economy has recovered strongly with 104.4% growth in 2012, driven by oil production coming back on line. • Libya’s economy remains heavily dependent on oil.
  4. 4. • Political Risk: Very High • Security remains a key concern in Libya, with limited control over lingering tribal rivalries who are now heavily armed as a result of the recent revolution. • High unemployment, shortage of housing and mismanagement of oil revenues are paramount problems for the current government. • Periodic shutdowns of Libyan oil production, strikes and increased protests have increased instability in the country and created a large fiscal deficit, limiting the governments ability to provide much needed food, medicine, electricity and wages. • Formation of a working government will be difficult due to the nascent political groups. • The rebuilding of infrastructure needs to be a key priority for the newly formed government. Source: A.M. Best
  5. 5. • Financial System Risk: Very High • The Libyan insurance industry is supervised by the Insurance Supervision and Controlling Authority (ISCA) of the Public Committee for Economy Trade and Investment. • Libya’s financial system remains heavily under state influence and foreign investment is subject to numerous restrictions. • Much of the foreign direct investment left the country in 2011 and has been slow to return as many investors wait for clarity on the political situation as well as
  6. 6. • Source : AMB Country Risk Report 2013

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