Oil production key to Libyan recovery

Resuming oil production should help Libya's economy rebound quickly from months of civil war but the economy is expected to get worse before it gets better.

The economy of war-ravaged Libya is expected to shrink 56 per cent in real terms this year. Rodrigo Abd / AP Photo

Libya's economy is expected to contract by more than half this year but could rebound quickly next year as oil production resumes, says the IMF.

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More than eight months of armed conflict and international sanctions stalled oil production and disrupted business activity this year, the IMF said in its latest regional outlook report.

"Assuming the security situation stabilises and politics moves constructively forward, we could see a relatively rapid recovery next year if the expectations that the authorities have on the rate at which oil production can pick up are to materialise," said Masood Ahmed, the director of the Middle East and Central Asia department.

Officials in the country's Transitional National Council (TNC) have indicated oil production could reach pre-conflict levels of 1.65 million barrels a day in the second half of next year.

The recovery also depended on how quickly the government was able to mobilise an estimated US$170 billion (Dh624.44bn) of assets frozen under UN sanctions in February and March.

Libya is starting to focus on how to restart its economy and organise elections as security returns after the death last week of Muammar Qaddafi, Libya's leader for four decades.

The IMF said it expected zero GDP growth in Tunisia next year and 1.2 per cent in Egypt. But a faltering global economy meant growth for oil-importing nations would be weaker than previously anticipated at just over 3 per cent next year.

In contrast, economic activity in most exporters had improved, underpinned by high oil prices.

GDP in the UAE would expand by 3.3 per cent this year, led by growth of 3.6 per cent in Abu Dhabi and 3 per cent in Dubai, the IMF said. GDP would accelerate to 3.8 per cent next year.

Saudi Arabia's economy would grow by 6.5 per cent this year before falling to 3.6 per cent next year, it said.

The risk of rising unemployment was one of the biggest challenges facing oil exporters, it said.