The Constitutional Republic of LIBERIA: Economic Perspectives
Liberia’s economy was seriously hit by the Ebola virus (5,000 people died). The epidemic triggered the country’s economy to collapse by 90% and lost incomes were estimated at 12% of GDP. Very dependent to commodity prices, the Liberian economy suffered from the drop of its main export products: gold, rubber, iron ores, vehicles, cocoa…
In 2020, GDP growth was negative, -3% against -2.5% in 2019. The IMF expects GDP to remain low (3.6% in 2021 and 4.7% in 2022), subject to the post-pandemic global recovery driven by the revival of investment in the Mining sector.
The mining sector (mainly gold production) is the primary engine of Liberia’s growth. The development of the mining sector pushed the country to expect a significant economic rebound for 2018 and 2019, but macroeconomic instability and worsening monetary conditions led to a slow recovering from the recession.
Despite the outbreak of Covid-19, GDP growth is expected to remain stable in 2020 at -2.5% and recover to 4% in 2021.
- The Primary Sector contributes in 2020 to 39% of GDP and employs up to 43% of the working population.
- The Secondary Sector contributes to 12% of GDP and only employs 10% of the working population.
- The Tertiary Sector contributes to 49% of GDP and employs nearly 47% of the working population.
With more than 4 million inhabitants, the 37th most populous country in Africa, Liberia, is the continent’s 42nd richest country with an estimated GDP of USD 3.07 Billion in 2020. President Georges Weah initiated a Pro-Poor Program to address infrastructure gaps, promote access to basic public services and fight corruption. Poverty reduction, job creation, improvement of infrastructures and agricultural development are the priorities for the government.
| Population (2020 UN) | 32.51 million inhabitants |
|---|---|
| GDP / Capita USD (2021, IMF) | USD 10.0 |
| HDI (2020, UNDP) | 79th over 190 |
| Doing Business (2020 World Bank rank) | 75th over 190 |
| Corruption Perceptions Index 2021 | 36h over 180 |
| Unemployment rate (FMI 2021) | 9.7% |
On a Demographic point on view, Liberia remains a poor country, with a high unemployment rate (not recorded in statistics but estimated at 3.3% in 2020 World Bank). Precarious employment and strong social tensions make the country be among the five poorest countries in the world: 85% of the population live without formal employment and 84% with less than USD 1.25 per day. Only 25% of the population has access to safe drinking water. Liberia also has one of the highest infant and maternal mortality rates. The country has not yet been able to integrate into the society disarmed combatants from previous conflicts who may be tempted to form or join regional militias.
On a Political point on view, the Liberian regime is modeled on that of the United States of America. Elected in December 2017 after two successive civil wars, President Georges Weah has raised many hopes, but economic difficulties and recurring problems of corruption fuel social protests. Strikes have been organized since the end of 2018 mainly in the Capital Monrovia, and they receive the support of some opposition parties from June 2019.
On an Economical point of view, in 2019, following a series of external shocks, including a drop in commodity prices and lingering effects of Ebola, the Liberian Dollar experienced a rapid depreciation of the exchange rate. In the table below, we can see the Average Annual Exchange rate for 1 MAD, a huge drop from 2017 to 2019 compared to the Moroccan dirham.
The Slowdown led to the decrease of foreign exchange reserves. Inflation accelerated reaching 27% in 2019 mainly linked to the depreciation of the Liberian Dollar against the US dollar. In 2020, the inflation rate was measured at 17% and it’s expected to decrease to 10.9% in 2021 before climbing to 15.2% in 2022.
Public debt has increased and reached 45.5% of GDP in 2019. It is expected to increase in 2020 (51.1%) and 2021 (56.9%) due to the increase in capital expenditure linked to the financing of development projects. The public deficit (-6% in 2019, -6.4% in 2020) should continue to increase despite measures to reduce the public wage bill. Current account deficit remained stable at -22.3% in 2019 although it’s expected to decrease to -18.7% in 2020.
| Economic Indicators | 2019 | 2020 | 2021e | 2022e | 2023e |
|---|---|---|---|---|---|
| GDP ($ Billion current price) | 230.87 | 205.46 | 225.86 | 231.69 | 246.72 |
| GDP growth (%) | 2.2 | -11.0 | 10.0 | 4.6 | 4.5 |
| Inflation rate (%) | 2.1 | 1.8 | 3.1 | 2.5 | 2.3 |
| Public debt (% GDP) | 27.1 | 35.1 | 35.0 | 36.9 | 38.5 |
| Current balance (% GDP) | -0.9 | 0.8 | 0.4 | 0.1 | -0.4 |
Central Bank of Liberia (CBL)
Like most central banks, the Central Bank of Liberia has taken measures to support the country’s economy. At end-December 2020, the stock of Liberian dollars in circulation reflected a growth of 13.2% compared to end-December 2019. The CBL explains this high level of currency outside banks as occasioned by macroeconomic uncertainty mainly exacerbated by the global pandemic.
Exports and Imports
In 2019, Liberia was the 160th economy in the world in terms of GDP (current USD) (141st in the total exports and 105th in total imports). The country exported USD 1.83 Billion and imported USD 9.6 Billion, resulting in a negative trade balance of USD -7.77 Billion.
The top exports of Liberia are Special Purpose Ships ($722M), Passenger and Cargo Ships ($381M), Iron Ore ($272M), Gold ($171M) and Rubber ($136M). Liberia exports mostly to Guyana ($586M), Poland ($181M), Switzerland ($149M), Japan ($136M), and China ($93.6M).
The top imports are Passenger and Cargo Ships ($6.6B), Refined Petroleum ($1.3B), Iron Structures ($168M), Boat Propellers ($167M) and Centrifuges ($153M). It imports mostly from China ($3.91B), Japan ($2.03B), South Korea ($1.71B), Brazil ($257M) and Germany ($242M).
