The lack of available and reliable data on the country makes it difficult to assess the risk in Libya. Political situation in Libya has been unstable since the fall of Gaddafi’s regime in August 2011. The internal security chaos has been leading to an institutional crisis in 2014 following the annulment by the Libyan Supreme Court of the election of the House of Representatives. Since then Libya has had two governments and two parliaments. On one hand, the Council of Deputies (CDR), recognised by the international community until March 2016, sits in Tobruk, in the far east of the country. On the other hand, the General National Congress (GNC) retains control of Tripoli. Following a number of failed attempts at dialogue under the auspices of the United Nations, the two governments reached an agreement in Skhirat in December 2015. This agreement led to the creation of a transition government. This national union government, led by Fayez el-Sarraj, has found it difficult to govern, even though it is recognised and supported by major Western powers and the UN. In fact, it was subject to a failed coup d'état in October 2016, is not recognised by Marshall Khalifa Haftar (a figure growing in influence in the armed forces under the command of the CDR), and maintains strained relations with the CDR. Whilst this agreement seems to be a first step towards a solution to the Libyan crisis, Libya remains a land split into lawless areas, areas under tribal control and a proliferation of militias. Furthermore, the jihadist threat remains latent, despite Daech capturing Syrte in December 2016. The latter retains scattered combatants, notably in the south of the country.

The future of the Libyan economy depends on an upturn in oil and gas production which has suffered since 2014 in the country's worsening security and political situation. The capture of the "oil crescent" by K. Haftar to troops loyal to F. Sarraj further threatens the political balance of the region and by extension, the possibilities of exporting crude oil. The handover of a part of the production terminals to the National Oil Company by the Marshall bodes well for a moderate upturn in the oil sector. Even a slight increase in oil exports in 2017 would boost Libyan growth, in a context of the gradual rise in the price of a barrel of Brent. However, such a scenario remains dependant on developments between the armed factions loyal to the rival authorities. The fighting between the numerous militias controlling various parts of the country is causing lasting damage to oil and gas infrastructures and further delaying any prospect of a return to the production levels of 2010 (on average 1.6 million barrels/day, compared to 0.4 million barrels/day in 2016). The weak currency, problems in obtaining and moving supplies as well as scarcity of goods are putting inflationary pressures on foodstuffs, property prices and transport costs. These pressures should increase in line with the end of subsidies on food products in 2016. These measures will greatly affect the standard of living of households already greatly tested by the political and security crisis.

After accumulating large financial reserves, Libya is now facing serious budget deficits. The acute reliance of public finances on the oil and gas sector has resulted in a collapse in budget revenue as oil output has contracted. In a bipolarised political context, the central bank has retained responsibility for the country's budgetary and monetary policy, allocating to each government, a share of the available financial resources. Faced with shrinking revenue, the central bank continues to finance what remains of the public institutions and services by dipping into the large currency reserves built up during the Gaddafi regime. The rise in prices of oil and gas will start an upsurge in oil revenue, which could help public accounts somewhat. The recourse to loans from commercial banks has resulted in a significant increase in the level of public debt. The sovereign debt risk is increasing as the debt increases and reserves are exhausted. The funds of the Libyan Investment Authority, estimated at 67 billion dollars in 2015 have been frozen by the UN Security Council whilst awaiting a solution to the political crisis. The rise in oil prices in 2017 and a possible increase in oil exports are favourable factors for improving the current account. However, the damage to oil and gas installations will prevent any marked rise in export volumes in the medium term. The current account deficit is also expected to grow in the coming years.