Libya’s civil war hugely disrupted the economy by cutting oil output, the primary source of revenue, to
virtually zero. As a result, the economy contracted 41.8% in 2011 but as oil production recovers, it should
expand 20.1% in 2012 as reconstruction takes holds, followed by a gain of 9.5% in 2013.
Libya has a record of high social inequality, high rates of youth unemployment and regional economic
disparities, not to mention years of poor governance and corruption. Libya’s future depends on the ability
of the interim government, headed by the National Transitional Council (NTC), to guarantee political
stability and encourage thorough reform of the economy.
Youth unemployment was among the main grievances that led to the Libyan uprising of 2011. The interim
government inherits a labour environment of private sector rigidity, inadequate youth skills and a youth
preference for public sector employment. Initiatives to encourage self-employment have been hampered
by the difficult business climate. The difficulties will be compounded, in the short term, by the aftermath of
the war but the political changes underway are an opportunity for the country to address these challenges.