Macroeconomic and Developmental Indicators
Liberia Economic Outlook
Social conditions have barely improved over the past decades largely due to the slow recovery from the aftermath of the long and protracted civil war during 1989-96. According to the 2016 household Income and Expenditure Survey (HIES), Liberia poverty levels is still high, with almost 2.2 million people or 50.9% of the population lives below the national poverty line. The poverty level is more pronounced in rural areas at 71.6% compared to 31.5% in urban areas. Inequality, as measured by the Gini coefficient, is estimated at 0.33, which is slightly above the regional average. Liberia has consistently ranked in the low human development category in the Human Development Index (HDI), ranked 176 out of 188 countries in 2018.
Liberia’s economic situation has deteriorated progressively over the past two years. Real GDP growth contracted from 2.5% in 2017 to an estimated 0.4% in 2019. The growth downturn reflects a combination of weak domestic demand, and subdued activities in agriculture, manufacturing and service sectors. The economic outlook is tilted downside in the short-term due to the expected worsening of the terms of trade, and increased fiscal and debt vulnerabilities. However, the medium-term outlook is expected to be favorable if reforms are successfully implemented. The inflation rate is the highest in the ECOWAS region, at an estimated 22.2% in 2019 from 12.4% in 2017. This is mainly due to the sharp depreciation of the Liberia Dollar at 26% year-on-year coupled with significant fiscal slippage and loose monetary policy.
The fiscal deficit widened to an estimated 6.0% in 2019 from 5.4% recorded in 2018, reflecting increased government expenditures, despite an improvement in revenue collections. Total government debt is estimated at 45.5% in 2019, from 39.9% recorded in 2018. The composition of the debt revealed that Liberia’s public debt is largely dominated by external debt almost 69%). According to the IMF debt sustainability analysis, Liberia remains a medium risk of debt distress but could be unsustainable if care in implementing its development strategy is not well managed. The current account deficit narrowed from 23.4% of GDP in 2018 to 21.2% of GDP in 2019 as a fall in export receipts was mitigated by a substantial reduction in imports.
The business environment is relatively unstable due to the deterioration of the macroeconomic situation and growing uncertainties in policy directions. According to the World Bank Doing Business Survey 2020, Liberia is ranked 175 out of 180 countries in the world.
Liberia is the only country in the WAMZ that did not meet a single primary convergence criterion in 2019, though it met one out of two secondary criteria during the same period.