Libya

In-depth country-focused analysis on Libya's economic, political and operational risk environment, complemented by detailed sector insight

Libya

As a result of ongoing political violence, a significant degree of productive capacity throughout the Libyan economy has been lost. Road, housing and utility infrastructure have suffered considerable damage and will take years to repair under even the most stable of political environments. Moreover, given the importance of the hydrocarbon industry, damage to oil production and refining infrastructure will pose significant long-term challenges.

Our coverage, using our unique Total Analysis model, ensures that our clients make sound business decisions in Libya. Our teams keep our clients informed of the latest market moves and political developments as part of our 'top-down' and 'bottom-up' perspective. We also provide in-depth analysis on seven of Libya's most important industries. Combining interactive data and forecasting with our expert research gives our clients the complete picture. We are confident that you will find doing business in Libya is made easier.

Country Risk

Libya Country Risk

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Core Views

  • Although Algeria is now turning to austerity, the country's remaining fiscal buffers will help to delay a more dramatic fiscal and economic adjustment. However, the next few years will see subdued growth and rising macroeconomic challenges. We forecast real growth to slow to 1.9% this year, down from an annualised 3.3% between 2010 and 2014.

  • The Algerian dinar will continue to gradually weaken against the US dollar throughout 2016, albeit at a slower pace. Oil prices are not set for a quick recovery, and the trade fundamentals of Algeria's economy remain bleak - factors that will weigh on the currency. However, the government will be reluctant to permit too great a slide of the dinar as pressures on households rise.

  • While lower oil prices will put further pressure on the Algerian regime over the coming years, we...

Libya Operational Risk Coverage (9)

Libya Operational Risk

BMI View:

BMI View: Libya has not yet been able to fully open up to foreign investment, despite Colonel Gaddafi's removal from power in 2011. In fact, the instability affecting the country since the revolution has only added to an already hostile business environment compounded by restrictions placed on FDI and a bureaucracy struggling to retain full functionality. Libya's overall score in the BMI Trade and Investment Market Risks Index is therefore low, which is indicative of the numerous risks foreign businesses wishing to operate in the country are likely to face. At 26.2 out of 100, Libya's score ranks last in the Middle East and North Africa (MENA) region...

Libya Crime & Security

BMI View:

BMI View: Ongoing political instability, the presence of Islamic State militants and the security forces' inability to maintain law and order act as major deterrents to investors. Businesses, particularly western entities face significant threats of violent attacks targeting civilians and key infrastructure, disrupting trade across sectors. The country's porous borders are gateways for illicit trade, human trafficking and terrorist activities across the region, heightening tensions with neighbouring countries. As a result, Libya receives a very low score of 14.3 out of 100 for Crime and...

Libya Labour Market

BMI View:

BMI View: Libya's labour market provides considerable risk to investors. Compounded by the effects of a volatile political and security landscape, businesses seeking operations in Libya face significant legal and reputational risks, as well as heightened business costs in the form of high minimum wages, low productivity, high amounts of paid annual leave as well as severance pay, and an outdated and restrictive system of employer sponsorship for foreign workers. Damage to educational infrastructure and continued insecurity will mean that there are little in the ways of improvement to the domestic labour pool for at least the short to medium term. Libya therefore performs poorly in the BMI Labour Market Risk index, with a score of 46.3...

Libya Logistics

BMI View:

BMI View: The damage caused by the 2011 civil war has resulted in an already poor logistics network deteriorating even further. Supply chain options are severely limited by the lack of inland waterways, railways, the poor quality of the road network and prevailing security risks. Importing goods to Libya can be time-consuming and costly owing to high levels of trade bureaucracy and the country's ports' reliance on feeder services. These factors pose significant risks to businesses in terms of both...

Libya Trade & Investment

BMI View:

BMI View: Libya has not yet been able to fully open up to foreign investment, despite Colonel Qadhafi's removal from power in 2011. In fact, BMI notes that the instability affecting the country since the revolution has only added to an already hostile business environment, due to restrictions placed on foreign direct investment (FDI) by the new government and a bureaucracy struggling to retain full functionality. Libya's overall score in the BMI Trade and Investment Market Risks Index is therefore low, which is indicative of the numerous risks foreign businesses wishing to operate in the country are likely to face. At 26.2 out of 100, Libya's score...

Libya Industry Coverage (9)

Autos

Libya Autos

BMI View:

BMI View: The short-term outlook for new vehicle sales is poor. This remains primarily due to the uncertain security situation, which has now seen most foreign automotive companies leave the market.

Vehicle Sales
2014-2020
e/f = BMI estimate/forecast. Source: Renault, BMI...

Defence & Security

Libya Defence & Security

BMI View:

BMI View: Libyan defence expenditure will expand over the next five years; although growth is starting from a low base, and as such, the overall size of the defence budget remains small on a global scale. We expect political instability to be the norm over the coming years and rising Islamist militancy will create demand for military equipment across the ground, air and naval segments. However, major purchases will be delayed over the medium term due to severe financial constraints, the ongoing restructuring of the Libyan armed forces and the reluctance of the...

Food & Drink

Libya Food & Drink

BMI View:

BMI View: Libya's weak consumer outlook will impact negatively on the country's food industry as food spending experiences tepid growth through to 2020. This is a result of ongoing political instability as well as rising security risks that deter Libya's trade conditions. The retail sector will further come under pressure with falling investor sentiment.

Food and Drink Spending
(2013-2020)
f = BMI forecast. Source: BMI, National statistics

Key Trends & Industry Developments...

Infrastructure

Libya Infrastructure

BMI View:

BMI View : Libya's construction sector is forecast to grow at 12% y-o-y in 2016 and average 4.9% over our 10-year forecast period. A degree of stability has been restored to the industry following a severe contraction in 2015, though investors will remain cautious in entering or re-entering the market owing to political instability and widespread violence. Upgrades to transport infrastructure and construction of water utility plants will drive growth over the short term.

Key Forecasts And Themes:

  • We continue to forecast 12% real growth over 2016, 5.6% over the next five years and 4.9% over our full 10-year forecast period. The spike in growth in 2016 is owing to base...

Insurance

Libya Insurance

BMI View:

BMI View : We see significant potential in North Africa for insurers. However, continued economic constraints will hamper the full development of the sector over the short term, particularly the non-life segment. That being said, strong government impetus in much of the region to augment health insurance density will boost penetration over the medium term. However, we continue to expect life insurance will underperform in comparison to non-life insurance, owing to the disinclination among much of the population to purchase life insurance policies when household budgets are tight....

Libya Insurance

BMI View:

BMI View: Tunisia's insurance market, though on the small side, is experiencing positive growth with premiums rising rapidly from a low base. Rising employment and income rates will support growth in both the life and non-life sectors over the forecast period through to 2020, though we do note that domestic and regional security concerns could deter investors and derail economic growth prospects.

...
Headline Insurance Forecasts (Tunisia 2013-2020)
2013 2014e 2015e

Oil & Gas

Libya Oil & Gas

BMI View:

BMI View : Despite continued progress in negotiations between the rival Libyan governments, the country's security and political outlook remains heavily clouded. This in turn will continue to dampen upstream production growth, due to the repeated targeting of oil and gas infrastructure; damage to wellhead, processing and export facilities; a lack of essential maintenance works; and chronic underinvestment in the sector. Exports will see a similarly slow recovery, with revenues further undercut by persistently low global commodity prices. The outlook on the downstream is equally bearish, with poor refining efficiencies and continued feedstock issues severely undermining overall utilisation rates.

Headline Forecasts (Libya 2013-2019)
...

Telecommunications

Libya Telecommunications

BMI View:

BMI View: BMI has not made any forecast revisions in the latest Q3 2016 report update and we continue to maintain our view that the Moroccan mobile market is in a state of flux, between a mobile segment seeking profitability and a fixed segment looking for higher competition. The rollout of advanced data services and 3G has not resulted in significantly increased profits for operators at present. Furthermore, the recent decline in Q116 suggests that inactive accounts are being shed as the penetration rate begins to rise. On the other hand, the fixed market continues to be dominated by Maroc Telecom, with the lack of progression in unbundling hindering growth, competition and the development of the market.

Robust Growth: 3G Subscribers (000)
2013-2016
...

Libya Telecommunications

BMI View:

BMI View : The North African telecoms sector continues evolving from comprising primarily of voice-centric markets towards markets driven by data consumption. Mobile broadband is increasingly becoming one of the core drivers and offers the greatest future growth opportunities. 3G services have been successfully launched in Algeria and Tunisia, and the 4G services licensing and deployment is now underway in both markets. However, demand for these services still depends on the macroeconomic situation: higher purchasing power helps with the...

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