Liberia

major macro economic indicators

(e): Estimate (f): Forecast *Including grants, Fiscal year 2022 from July 1, 2021 to June 30, 2022 **Including official transfers

RISK ASSESSMENT

A recovery is in progress but remains fragile 

Since the Ebola epidemic in 2014, the country's growth has been volatile. After being negative for two consecutive years, notably due to the impact of the COVID-19 pandemic in 2020, growth returned to positive territory in 2021. In 2022, despite the slow pace of the vaccination campaign (in October 2021, only 0.5% of the population had been fully vaccinated), the recovery will continue. It will be driven by external demand for products from forestry, agriculture (rubber, rubberwood, cocoa, palm oil) and, above all, mining (iron, gold, and diamonds). With prices rising for almost all of these exports in 2021 and expected to remain high in 2022, the country's trade is set to benefit from it. Consumption will continue to rebound in 2022 as well, but the recurrent threat of banknote shortages will likely put pressure on its contribution. Consumption will be additionally supported by remittances flows from abroad, but also by the country's vaccination campaign, which is being bolstered by the WHO's COVAX initiative, after previously receiving 300,000 doses from the United States in 2021, as well as Chinese and French financial aid. Private investment should improve, mainly thanks to a new 25-year agreement reached with ArcelorMittal in September 2021 approving a USD 800 million extension of the Mineral Development Agreement signed in 2005. The agreement covers the expansion of the mine, processing plant, rail and port facilities. From 2023 onwards, it could allow for the annual delivery of between 15 and 30 million tons of iron ore, compared with five million tons previously. Public investment in infrastructure (notably transport and electrification) should continue its slow post-pandemic recovery.

Inflation will rise moderately in 2022, interrupting the disinflationary trend that began at the end of 2019. Despite the increased stability of the Liberian dollar and the monetary policy of the central bank, which is expected to maintain an interest rate of around 20%, high commodity prices should continue to fuel inflationary pressures.

Deficits financed by external aid

Chiefly burdened by a large trade deficit, the current account deficit will remain very high, but relatively stable. In 2022, the prices of export products, mainly agricultural and mining products, are expected to remain high, as are the prices of imported goods, especially oil, keeping the deficit at a relatively similar level. The trade deficit will be partially mitigated by a surplus in the transfer account, thanks to expatriate remittances, which already increased by 36.2% between 2020 and 2021. Services, and to a lesser extent the primary income account, will post deficits. The current account deficit will be financed partly by FDI (8% of GDP), but mainly by concessional multilateral loans. Although they will remain low (2.3 months of import coverage in July 2021), foreign exchange reserves should increase slightly. This could allow the Liberian dollar to continue its recent stabilisation, after a two-decade period of depreciation (its value against the USD fell by more than fourfold between 2000 and 2020).

The government deficit is expected to decline in 2022, thanks to improved mining revenues and spending restraint commitments under the ECF with the IMF. The implementation of the domestic resource recovery strategy, which aims to increase budgetary revenues and minimise tax losses, is expected to boost government revenues. As part of the ECF, the country has also committed to upholding debt rules, which include a reduction in domestic borrowing from the Central Bank of Liberia (CBL). Public debt will remain high, but is expected to decline further in 2022. The external share of the debt makes up the lion’s share (70% of the total) and is almost exclusively multilateral and concessional, reducing the risk of debt distress.

Pandemic undermines George Weah's administration

The election of former footballer George Weah in 2017 represented the first peaceful democratic transition in a country marked by two successive civil wars (1990-1997 and 1999-2003). Through his Pro-Poor Agenda for Prosperity and Development (PAPD), President Weah affirmed his desire to remedy the lack of infrastructure, to promote access to basic public services and to fight corruption. However, criticism of the handling of the COVID-19 crisis (numerous lockdown measures, weak health services, etc.), corruption scandals and social unrest linked to widespread poverty and mass unemployment, which have been aggravated by successive economic crises, have eroded the president's popularity, and in the mid-term elections to the Senate in 2020, his party lost its majority to the Collaborating Political Parties, a coalition of opposition parties and independent candidates. By the time of the next presidential elections, scheduled for October 2023, political and social stability could well be tested amid widespread criticism of George Weah’s administration. 

Last updated: February 2022