The medium-term economic outlook of Liberia seems optimistic, despite substantial downside risks, including further slump in commodity prices, incomplete structural and institutional reforms, and risky borrowing, according to the World Bank.
In a new report titled: “Liberia At-A-Glance,” the Bank says the emerging recovery is driven largely by increased production of gold and iron ore, following uptick in prices in the international market as non-mining sector Gross Domestic Product (GDP) growth remains very low.
However, it further notes that inflation continues to rise during the year, reaching an all-time high of 24 percent in June 2018 from 10.8 percent, the same period last year, and that this is largely due to a sharp drop in foreign exchange supply following the drop in exports and donor inflows.
The fiscal deficit widened to 5.2 percent of the GDP in fiscal year 2018, compared to 4.8 percent of GDP in FY2017, due to a significant shortfall in revenues and higher than anticipated non-discretionary expenditures, the report continues.
It says shortfall in revenues by 20 percent of the approved budget, is due to the slower than anticipated economic activities in line with prolonged political uncertainty, tax waiver policies in the run-up to the presidential elections and unsolved court dispute with respect to the collection of petroleum levy and lower than projected donor grants.
“The new administration is expected to mitigate these risks by embarking on policy reforms that will promote economic diversification, improve the investment climate, and promote domestic revenue mobilization and to ensure prudent borrowing strategy,” the report says.
In the meantime, it further suggests that Liberia’s economy is still struggling to recover from the effects of multiple shocks and others in recent years, such as the Ebola Virus Disease, the collapse of commodity prices, and the draw-down of the UN peacekeeping mission (UNMIL).
The tough economic situation was also attributed to the perception of risk associated with the political transition in January 2018.The World Bank notes the resultant rise in the cost of living and limited employment opportunities continue to undermine the welfare of Liberians, and the 2016 Household Income and Expenditure Survey suggests that more than half of the country’s population lives in poverty.
By Ethel A. Tweh