—-As Expansion of Services, Agriculture and Mining Export Expected to increase Shapely; But Infighting At House of Representatives May Potentially Slow Progress
IPNEWS: International Experts are predicting a significant Economic growth for Liberia in 2025 under the government of President Joseph N. Boakai.
World Bank officials tell the authoritative Independent Probe Newspaper that Liberia is expected to shapely accelerate in forecast from 5.2% in 2024 to 6.2% in 2025, due to the expansion of services and agriculture and existing mining projects.
Inflation is projected to decline to 8.4% from previous year of 2024 to evenly low 5.7% in 2025 due to anticipated stability in the exchange rate and tighter monetary policy.
Experts also predict that ongoing destabilization of the Legislature will slow policymaking for growth acceleration. Currently, the Speaker of the House of Representatives, Cllr. Fonati Koffa is being forcibly remove from office regardless of a ruling my Liberia’s Supreme Court that attempts to remove the Speaker were “Ultra Vires”
Under this projected economic growth, the Boakai led government is expected to receive the necessary support from independents to pass crucial policy changes (such as mining laws). Policy over the 2024-25 forecast period will focus on launching mining sector reforms, reining in the fiscal deficit and advancing infrastructure development, which supports our positive growth outlook.
The authoritative Independent Probe understands that an expected IMF funded programme will help to build credible policies, attracting and strengthening real GDP growth over 2024-25, by increasing mining-related export earnings (including from iron ore and gold).
An expected rise in iron ore output, strong investment in infrastructure development and increasing private consumption to support growth is further predicted.
Upon taking office, the government under the stewardship of President Joseph N. Boakai, initiated several reforms including the process of establishing the “Office of a War and Economic Crimes Court for Liberia” through an Executive Order on May 2, 2024. The Court will investigate atrocities committed during Liberia’s fourteen years of civil war and will aim to hold responsible parties accountable for their crimes. On May 3, 2024, the Liberian Senate and House of Representatives endorsed a joint resolution in support of the mechanisms for the court’s establishment. The process leading to the recruitment of officials to administer the affairs of the court has commenced.
In line with a strong focus on accountability and good governance, the Government has also established an Assets Recovery and Property Retrieval Taskforce to pursue allegations of illegal acquisition of wealth and property while placing emphasis on transparency and accountability. According to the Liberia Anti-Corruption Commission (LACC), only 26.5% of officials across the three branches of government have fully met asset declaration compliance requirements to date. This is critical for transparency and accountability: all appointed, elected, and selected public officials are required to declare their assets, incomes, and liabilities per the National Code of Conduct and LACC regulations. The primary purpose of this exercise is to prevent and detect illicit enrichment, conflicts of interest, and other forms of corruption.
The Government continues to pursue its accountability agenda. The General Auditing Commission has been actively conducting financial audits, some of which have led to arrests and issuance of indictments. The Government has outlined its vision for Liberia’s development through the ARREST agenda – an acronym representing Agriculture, Roads, Rule of Law, Education, Sanitation, and Tourism. The Government wants to leverage these key sectors to reverse economic stagnation, emphasizing the need for comprehensive and interconnected development strategies.
Outlook and risks
Growth is forecast at 5.2% in 2024 and 6.2% in 2025, driven by the expansion of services and agriculture and existing mining projects. Inflation is projected to decline to 8.4% in 2024 and 5.7% in 2025 due to anticipated stability in the exchange rate and tighter monetary policy. The fiscal deficit is forecast to edge from 3.4% of GDP to 4.2% in 2024 and deteriorate further to 4.5% in 2025 on projected increases in government expenditure. The current account deficit is forecast to increase to 23.7% of GDP in 2024 and to 24.6% in 2025, due to projected increases in imports. The exchange rate and financial market are projected to remain stable. Downside risks include Russia’s continuing invasion of Ukraine and deterioration of the terms of trade for gold and rubber. Tailwinds include increased demand for Liberia’s exports. Mitigation measures could include f iscal consolidation and improved governance.
Liberia’s economy expanded by 4.7% in 2023 and is expected to maintain this momentum over the medium term. Growth in 2023 was primarily driven by mining, expansion in gold output, and construction. The services sector grew by 3.7%, driven by the financial and hospitality subsectors, increased trade and transport activities, and improved access to electricity. Output in the agriculture sector grew by a modest 1.4%, reflecting declines in palm oil and rubber production. On the demand side, continued recovery in private consumption, increased public-sector spending, and a surge in gold exports were the main drivers of growth. Growth is expected to remain robust, averaging 5.8% over the medium term supported by renewed interest and investments in mining coupled with continued implementation of critical reforms in key enabling sectors such as energy, transportation, trade, and financial services.
The government’s fiscal deficit reached an unsustainable level in 2023 but is expected to narrow in the medium term. Liberia’s fiscal deficit increased by 1.5%age points to 7.1% of GDP in 2023 due to a decline in revenues and grants and increased consumption spending. In the medium term, the fiscal deficit is expected to decrease as the authorities enhance domestic resource mobilization and bolster expenditure controls. Liberia is at moderate risk of external debt distress and high risk of overall debt distress. The country’s debt to GDP ratio stood at 58.8% of GDP in 2023.
Headline inflation rose to 10.1% in 2023, up from 7.6% in 2022, primarily driven by food prices, exchange rate depreciation, and monetization of the budgetdeficit.Inflationary pressures have started to ease in 2024 and are expected to remain within single digits in the medium term if the authorities maintain prudent fiscal and monetary policies.
Liberia’s savings and investments gap widened during 2023, leading to a current account deficit (CAD) of 26.4% of GDP. Exports increased by 8.2%, slower than the 16.6% growth in 2022, while imports expanded by 27.2% due to higher petroleum products and machinery prices, leading to a higher trade deficit. The CAD was financed by net IMF credit, loans, and drawdowns of gross official reserves. Consequently, gross external reserves fell to US$486 million in 2023 from US$644 million in 2022, covering about two months of imports. The CAD is projected to remain elevated in the medium term, averaging 22% of GDP, due to increased domestic demand and capital imports for vital infrastructure and investments.
Climate change issues and policy options
Structural transformation has been slow. Agriculture’s share in value added declined from 66% in 2002 to 29.5% in 2023, while services’ share rose from 30% to 51% and industry’s from 3.8% to 19.5%. Agriculture’s share of total employment declined from 51% in 2002 to 42% in 2023 and industry’s from 22% to 10%, while services’ share increased from 37% to 48%. Government should promote productivity in natural resources through greater value addition and invest in human capital and infrastructure, particularly roads and energy.
Adequately financing structural transformation in Liberia requires improving revenue collection, reducing public expenditure, managing natural resources, leveraging international support, promoting sustainable debt financing, and strengthening institutions. Liberia needs to establish a Green Bank and to capitalize on its carbon sink services in the carbon market. However, carbon trading should be informed by a robust strategic vision and policy framework. The International Monetary Fund’s global f inancial safety net needs to increase its liquidity provision for Liberia. In the short term, the government should mobilize domestic financial resources and manage its international aid more effectively, focusing on grants and concessional loans that do not raise debt levels. In the medium term, the government should encourage foreign direct investment by improving the business environment.
