Liberia - Economy

Economy

Liberia is one of the world's poorest countries, with a formal employment rate of only 15%. GDP per capita peaked in 1980 at US$496, when it was comparable to Egypt's (at the time). In 2011, the country's nominal GDP was US$1.154 billion, while nominal GDP per capita stood at US$297, the third-lowest in the world. Historically, the Liberian economy has depended heavily on foreign aid, foreign direct investment and exports of natural resources such as iron ore, rubber and timber.

Following a peak in growth in 1979, the Liberian economy began a steady decline due to economic mismanagement following the 1980 coup. This decline was accelerated by the outbreak of civil war in 1989; GDP was reduced by an estimated 90% between 1989 and 1995, one of the fastest declines in history. Upon the end of the war in 2003, GDP growth began to accelerate, reaching 9.4% in 2007. The global financial crisis slowed GDP growth to 4.6% in 2009, though a strengthening agricultural sector led by rubber and timber exports increased growth to 5.1% in 2010 and an expected 7.3% in 2011, making the economy one of the 20 fastest growing in the world. Current impediments to growth include a small domestic market, lack of adequate infrastructure, high transportation costs, poor trade links with neighboring countries and the high dollarization of the economy. Liberia used the United States dollar as its currency from 1943 until 1982 and continues to use the U.S. dollar alongside the Liberian dollar. Following a decrease in inflation beginning in 2003, inflation spiked in 2008 as a result of worldwide food and energy crises, reaching 17.5% before declining to 7.4% in 2009. Liberia's external debt was estimated in 2006 at approximately $4.5 billion, 800% of GDP. As a result of bilateral, multilateral and commercial debt relief from 2007–2010, the country's external debt fell to $222.9 million by 2011.

While official commodity exports declined during the 1990s as many investors fled the civil war, Liberia's wartime economy featured the exploitation of the region's diamond wealth. The country acted as a major trader in Sierra Leonian blood diamonds, exporting over US$300 million in diamonds in 1999. This led to a United Nations ban on Liberian diamond exports in 2001, which was lifted in 2007 following Liberia's accession to the Kimberley Process Certification Scheme. In 2003, additional UN sanctions were placed on Liberian timber exports, which had risen from US$5 million in 1997 to over US$100 million in 2002 and were believed to be funding rebels in Sierra Leone. These sanctions were lifted in 2006. Due in large part to foreign aid and investment inflow following the end of the war, Liberia maintains a large account deficit, which peaked at nearly 60% in 2008. Liberia gained observer status with the World Trade Organization in 2010 and is in the process of acquiring full member status.

Liberia has the highest ratio of foreign direct investment to GDP in the world, with US$16 billion in investment since 2006. Following the inauguration of the Sirleaf administration in 2006, the country signed several multi-billion dollar concession agreements in the iron ore and palm oil industries with numerous multinational corporations, including BHP Billiton, ArcelorMittal, and Sime Darby. The Firestone Tire and Rubber Company has operated the world's largest rubber plantation in Liberia since 1926. Liberia has also begun exploration for offshore oil; unproven oil reserves may be in excess of one billion barrels. The government divided its offshore waters into 17 blocks and began auctioning off exploration licenses for the blocks in 2004, with further auctions in 2007 and 2009. An additional 13 ultra-deep offshore blocks were demarcated in 2011 and planned for auction. Among the companies to have won licenses are Repsol, Chevron, Anadarko and Woodside Petroleum.

Due to its status as a flag of convenience, the country has the second-largest maritime registry in the world behind Panama, with 3,500 vessels registered under its flag accounting for 11% of ships worldwide.