Liberia's Economic Future: World Bank Report Highlights Pathways to Sustainable Growth and Diversification

Liberia continues to struggle with the "natural resource trap," where its dependency on a commodity-based economy has led to cycles of stagnation and slow recovery.

The World Bank has released its flagship report, the Liberia Country Economic Memorandum, titled "Escaping the Natural Resource Trap: Pathways to Sustainable Growth and Economic Diversification in Liberia." This in-depth analysis explores Liberia’s economic landscape, highlighting vulnerabilities to external shocks and the urgent need for reforms to achieve sustainable development. The findings offer critical insights to inform the effective execution of the ARREST Agenda for Inclusive Development (AAID).

Challenges and Current Economic Realities

Liberia continues to struggle with the "natural resource trap," where its dependency on a commodity-based economy has led to cycles of stagnation and slow recovery. Weak drivers of long-term economic prosperity, including human capital development, wealth accumulation, and productivity, have left the country vulnerable to global economic fluctuations. The report warns that under a "business-as-usual" approach, growth will remain modest, delaying the country’s transition to middle-income status until approximately 2050, far beyond its 2030 target. Furthermore, real per capita GDP will see only incremental growth, insufficient to significantly reduce poverty levels.

The Need for Institutional and Policy Reforms

World Bank Liberia Country Manager, Georgia Wallen, emphasized the necessity of comprehensive institutional and policy reforms to strengthen the public sector and drive national transformation. Aligning with the ambitions of the AAID, these reforms should focus on:

• Overhauling the business climate to stimulate private investment, innovation, and job creation.
• Enhancing core public services, particularly in education and health, to boost human capital.
• Improving the efficiency and scale of public investments in essential infrastructure, including power, roads, and telecommunications.

Five Transformational Shifts for Sustainable Growth The report identifies five crucial transformations required for Liberia to create a foundation for sustained economic expansion, job creation, and poverty reduction:

1. Reshaping the Macro-Economy: Implementing policies that ensure macroeconomic stability and long-term growth prospects.
2. Diversifying Beyond Mining: Moving away from over-reliance on the mining sector towards sectors that align with urban labor demands.
3. Strengthening the Private Sector: Recognizing private enterprises as the primary engine of economic growth and employment.
4. Modernizing Public Institutions: Implementing deep-seated policy and institutional reforms to enhance public sector governance and efficiency.
5. Investing in Human Capital and Infrastructure: Improving education, healthcare, and infrastructure to increase productivity and competitiveness.

A Vision for Liberia’s Economic Future

If Liberia embarks on an ambitious reform agenda, the country has the potential to significantly improve its economic trajectory. By implementing key reforms, Liberia could double annual productivity growth in the non-mining sector, extend average schooling years from four to ten, enhance education quality, reduce stunting, and improve adult survival rates. Additionally, increasing private and public investments to 18% and 12% of GDP, respectively, could accelerate real GDP growth by one percentage point annually.

With these measures, Liberia could achieve lower middle-income status before 2040, generate substantial employment opportunities, and reach a projected real per capita GDP of $2,000 by 2050. The World Bank report underscores that decisive action today can unlock a more prosperous, diversified, and resilient future for Liberia.