Oil output to shield Libya from $1.8bn flooding bill

Reuters/Esam Omran Al-Fetori

• Oil production rose 12% in 9 months
• Storm-hit areas contribute little to GDP
• 7% of housing destroyed or damaged

Libya’s economy will be largely shielded from the multi-billion-dollar costs of catastrophic flooding by an increase in oil production, a report has predicted.

The cost of reconstruction and recovery is estimated at nearly $1.8 billion, according to research from the World Bank, United Nations and European Union. Damage and economic losses are said to total $1.65 billion. 

The flooding last September was caused by Storm Daniel, which affected about 1.5 million people, mostly in the eastern coastal districts of Jabal Al Akhdar, Marj and Derna. Torrential rains caused two dams to fail, resulting in thousands of deaths.

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An estimated 18,500 houses – 7 percent of the country’s housing stock – were destroyed or damaged. 

The Libya Rapid Damage and Needs Assessment report estimates that 70 percent of the reconstruction costs will be for infrastructure, with housing the largest component.

But analysts from the World Bank believe the disaster will not have significant macroeconomic consequences for the nation. 

Before the floods, Libya’s economic outlook for 2023 was promising, with economic growth of 14.1 percent forecast. GDP had fallen by 1.2 percent the previous year. 

Libya’s oil production rose by 12 percent to 1.19 million barrels per day in the first nine months of 2023. This bolstered industrial activity, which grew by 11.3 percent. A 10 percent rise in the government wage bill fuelled an 18.7 percent increase in services. 

Three large oil companies that had suspended their activities over security concerns resumed production in August.

The Libyan economy is dominated by the oil industry. The private sector remains underdeveloped, accounting for as little as 4 percent of GDP and employing just 15 percent of the workforce. 

Computer modelling suggests the floods could lead to a 0.07 percent reduction in Libya’s GDP this year, because of damage and losses in the affected areas, the report said. The reduction could reach 0.23 percent next year without a well-thought-out reconstruction plan, the World Bank warned.

The limited macroeconomic impact can be attributed to the concentration of the disaster in areas that make a minimal contribution to Libya's GDP, the report added. 

Jabal Al Akhdar, Derna and Marj collectively account for 75 percent of the estimated damage and losses, but their contribution to total Libyan GDP stands at just 7 percent.

However, GDP loss could be significant at the regional level, analysts said.

Nearly 44,800 people were initially displaced, including 16,000 children. Access to healthcare and education has deteriorated and food insecurity has increased in the affected areas, the report said.

Jesko Hentschel, country director for the Maghreb and Malta at the World Bank, said: “Storm Daniel and the catastrophic floods that followed had a devastating, tragic impact on so many people in Libya who lost family members, their homes, and livelihoods.”