Policymakers in much of the Western world could be forgiven for envying the 122 per cent growth seen by Libya’s economy in 2012. They probably would not mind the double-digit increases in output projected for 2013 and 2014 either. But even with huge growth figures like these, the Libyan economy will remain a headache for Tripoli for some time to come.
The problem is one familiar to the region’s oil exporters. It is also one they are yet to solve. Increasingly, oil export-led growth is not creating enough jobs for nationals. Libya’s economy is unquestionably dominated by oil.
For Tripoli, this is both an opportunity and a potential misfortune. If the government can get its policy mix right, Libya could lead the way among Arab oil exporters in balancing domestic demands for decent jobs with economic expediency. Innovation and entrepreneurship should be encouraged and rewarded. The private sector must be allowed to compete and grow.
But as regional leaders are keenly aware, unpopular policies can lead to widespread unrest. Libya is now run in a more accountable and transparent manner than at any point in its history and the fact that the Tripoli government of Ali Zeidan is made up of MPs elected after nationwide polls means that their legitimacy is not solely based on the public goods they can provide. But by the same token, they can be thrown out if their management of the economy proves unpopular.
Unfortunately the decisions necessary to create a thriving private sector that creates the number of jobs required often prove unpopular, making the balancing act between doing what is necessary, and remaining popular a particularly delicate one.
The clock is ticking to see whether they can find a solution.