IMPACT OF THE POLITICAL INSTABILITY ON THE LIBYAN ECONOMY

Abstract

Regarding the Libyan macroeconomic framework, the petroleum sector returns caused to the government and the need to support civil service job opportunity and preserve the widespread funding system. In 2006, the increasing of the price of the Libyan price oil, around US $63.05, had a significant and positive influence on the Libyan economic situation. The price increased around 65 % compared to the corresponding value in 2004 which was in averaged around US $38.In the same context, the favorable enhancement in the oil sector donated to an observable development in balance of payment surplus, which achieved around 15.4 % of gross domestic product. Also, international reserves improved to be around 19 billion US dollars. Moreover, the Libyan authorities have decreased the bank the percentage of interest rates across the board to enhance the demand in the private sector for credit and established a strategy to update the payment system. All these monetary policies and strategies affect positively on the Libyan macroeconomic and financial situations to be satisfactory in 2004.In 2005, the performance of the macroeconomic stayed comparatively strong. The gross domestic product achieved approximately about 3.5 %. Moreover, the inflation stayed 2.5 %. On the other hand, the economic development is assessed to have been created mainly 4.5 % in the non-oil sectors. In details, the non-oil sectors such as hotels and transportation, construction and services, agriculture and manufacturing sector with respectively values 7%, 5%, 2.5 % and 1.8%. unfortunately, all these sectors showed weak performance recently because of the unstable political situation in the country.Regarding to the banking sectors, according to (Murugiah and Akgam, 2015), Libyan banking sector has realized especially after the issuance of laws. In 2005, this Central Bank of Libya has significant impact on establishing banks and reorganization assets inducing them to look for new investment chances. In our model, the variables Stock Capital, Libyan Oil PriceNumber of population in Libya and dummy variable for the political instability have significant impact on the Libyan gross domestic products at 5% significance level. The heteroscedasticity and autocorrelation tests are checked in the model.Finally, we conclude that increasing (decreasing) the oil and gas prices has a significant influence on the economic development generally in Libya and on the macroeconomic indicators, such as gross domestic product, monetary policy, the unemployment rate, and the inflation rate in the country.