Macroeconomic performance
Real GDP growth rebounded to 3.2% in 2018 from 2.5% in 2017, driven mainly by mining and manufacturing. Agriculture, forestry and fishing dominate the economy, contributing 70.3% of GDP in 2017.
A moderate increase in revenues, combined with a reduction in spending, helped bring the budget deficit down to -3.9% in 2018, compared with -7.9% of GDP in 2017. Liberia's risk of debt distress is moderate. Total public debt stood at 41.3% of GDP in 2017. The external part of the debt amounts to around 69.6% (or 29% of GDP).
In 2017, the Liberian dollar depreciated by 24.5% against the US dollar and by 27% at the end of June 2018. The depreciation is due to deteriorating terms of trade and strong demand for foreign currency for imports. Nevertheless, inflation is estimated at 11.7% in 2018, slightly lower than in 2017, partly due to high dollarization (around 70% of money supply).
The current account deficit improved slightly to 22.4% in 2018 from 22.7% in 2017, thanks to an increase in exports driven by gold production and a slight recovery in commodity prices. Gross foreign exchange reserves increased slightly from 3.0 months of imports in 2017 to 3.6 months at the end of June 2018.

Outlook: positive and negative factors
The economic outlook is positive, with real GDP growth set to rise to 4.7% in 2019 and 4.8% in 2020, supported by modest growth in agriculture, fishing and services. Inflation is expected to fall further to 10.5% in 2019 and 9.5% in 2020, due to a stable exchange rate, prudent monetary and fiscal policies, and a moderate increase in domestic food production. The current account deficit should remain slightly above 22% in 2019 and 2020.

However, the positive outlook could be overshadowed by the risk of over-indebtedness. Indeed, the risk can shift from moderate to high if borrowing for necessary public investments increases while production in the main export sectors declines. Declining aid flows (after the 2014-2016 Ebola epidemic) and the completion of the UN peacekeeping mission in Liberia in 2018 could have an unfortunate impact on the economic outlook. The shortage of foreign currency could hamper the heavily dollarized banking sector. Dependence on commodity exports (gold and iron ore) and imports of food and fuel make the economy extremely vulnerable to external shocks. More specifically, recent trade tensions could lead to a slowdown in advanced economies or in China, thus reducing demand for Liberia's commodity exports.

The lack of infrastructure, particularly in the transport (roads), energy, water and sanitation sectors, is holding back development. For example, the country has some 12,000 kilometers of roads, of which only 7% are paved. Various structural reforms are being implemented with a view to accelerated, inclusive and sustainable development. Expanding and improving the road network is a priority, with a plan to tar at least 650 kilometers of main roads over the next five years. Increased access to affordable energy, water and sanitation is also a priority. Infrastructure development, based on the creation of special economic zones, is essential for industrialization. In addition, developing the skills of young people will enhance their employment prospects.

Source: African Economic Outlook (AEO) 2019