Political attention is now being focused on the 2017 presidential election, which will be held in a complex political, social and economic situation marked by the twin shocks of the Ebola crisis and the sharp decline in commodity prices, public concern over the peacekeeping missions drawdown, and challenges posed by the security transition.
On June 30, 2016, the multinational peacekeeping forces will officially handover the security responsibilities to the Government of Liberia with a reduced presence on the ground. The UN Mission in Liberia (UNMIL) stated that the Mission will remain engaged with the authorities in strengthening the legal framework and institutional structures of the justice and security sectors, as well as in establishing proper accountability mechanisms. In accordance with Security Council resolution 223, the Mission had implemented its drawdown plan and the authorized reductions of its military and police components, which will be further reduced from the authorized strength of 3,590 to 1,240 military personnel and from 1,515 to 606 police personnel by June 30, 2016.
Liberia’s economy deteriorated further in 2015, with GDP growth of 0.3%, further down from 0.7% in 2014. The country is struggling to recover from the twin shocks of the Ebola crisis and the sharp decline in commodity prices, which led to business closures, including of mines and consequent job losses and reduced fiscal revenues. Substantial downside risks remain, which challenge the government’s recovery efforts and plans to diversify the economy to mitigate the impact of such future shocks.
The continued terms-of-trade shocks and the reversal in private investment inflows due to the outbreak of the Ebola Virus Disease (EVD), have prolonged Liberia’s post-Ebola economic recovery. The mining sector, which was one of the key drivers of economic growth declined by 17%, followed by 1.1% decline in the agriculture sector. The economy was however salvaged by a relatively resilient services sector, which grew by 5%; attributable mainly to the recovery in construction, hotels and trading services. Furthermore, fiscal revenues are projected to decline by 12%, based on the original forecast of US$474million. This will necessitate expenditure cuts by Government in order to maintain the already high fiscal deficit target of 8.5% of GDP in FY2016.
GDP growth is projected to recover to about 3.9% in 2016. The recovery is expected to be driven by the coming on stream of a new gold mining concession, and improvements in services as rural and urban markets re-open. However, the slowing of China’s economic growth and its potential adverse impact on the global economy are likely to keep already low commodity prices depressed. This remains a major downside risk for Liberia, given its dependence on the exports of rubber, iron ore and oil palm for growth, employment and fiscal revenues. Prudent fiscal and monetary policies are critical to help mitigate the shocks but a restart of both public and private investment will be important to help spur economic diversification and growth over the medium term.