Discusses key economic indicators and trade statistics, which countries are dominant in the market, and other issues that affect trade.
Businesses may consider Liberia attractive for entry due to its natural resources, low cost of labor, and relatively low levels of foreign investment which could enable enterprising firms to become dominant players. Liberia’s economy is market-based and largely dependent on natural resources, foreign aid, and foreign direct investment (FDI). The few large foreign concessions, such as Orange Liberia, Firestone, ArcelorMittal, and MNG Gold, pay a large proportion of the government’s taxes and royalties. The Central Bank of Liberia (CBL) reported that direct investment (DI) inflows, by foreign and domestic companies and investors, increased by less than one percent, to $95 million in 2021. Liberia relies on commodity exports (mainly rubber, iron ore, and gold) as its major source of export earnings. Binding constraints to economic growth include inadequate infrastructure (roads, ports, electricity, water, sewage, and telecommunications), widespread corruption, limited access to finance, cumbersome tax regulations, weak institutional capacity, and a shortage of skilled labor. The International Monetary Fund (IMF) estimated Liberia’s real GDP expanded by 4.2 percent in 2021 after contracting 3 percent in 2020. It is projected to grow by 4.5 percent in 2022, driven largely by manufacturing, trade, and services.
Downside risks, however, include structural macroeconomic imbalances and reduced economic activity because of inflationary pressures caused by Russia’s invasion of Ukraine and because of reduced business investment ahead of the October 2023 presidential elections. According to the CBL, average annual inflation in 2021 fell to 5.5 percent from 13 percent the year before, mainly due to the CBL’s tighter monetary policy and the pass-through effect from the Liberian dollar (LRD). Export earnings for 2021 grew to $878.5 million, up from $607.7 million in 2020, largely driven by increases in export values of key commodities, mainly iron ore, minerals, and rubber. Import payments increased to $1.33 billion, from $998 million the previous year. CBL statistics indicate that Liberia’s leading export destinations in 2021 were Europe (82 percent, mainly iron ore and gold), followed by North America (8.2 percent, mainly the U.S., which buys rubber), and by Asia (5.9 percent, especially China and India, which buy iron ore and palm oil). Liberia’s exports to the United States were $70.5 million while imports from the United States were $64.4 million. The following are among the reasons U.S. companies may choose to enter or expand into Liberia’s market:
- Low cost of labor: The minimum wage for a formal sector job is US $5.50 or its Liberia dollar equivalent per day (for a day’s work). The informal sector’s general minimum wage is around US $3.50 or its Liberian dollar equivalent per day (for a day’s work).
- Minimum restrictions on repatriation of profits and no restriction on currency exchange: The Investment Act of 2010 allows investors to repatriate capital and profits that may include profits and dividends (net of taxes), remittances of money (net of taxes) in the event of sale or liquidation of a business, and repayments of loans acquired from foreign banks.
- Large untapped natural resources such as gold, diamonds, iron ore, and timber.
- Access to regional markets: Liberia is a member of ECOWAS, which has an estimated population of nearly 350 million, with approximately 60 percent young consumers.