Forecasting the Future: Economic Projections and Strategic Decision-Making in Libya

Abstract

This study analyzes Libya’s economic growth and inflation rates from 2000 to 2024 and develops forecasts for 2024–2032 using time-series econometric models. The Box–Jenkins methodology was applied, employing ARMA (4,1) for economic growth and ARIMA (2,1,1) for inflation, following stationarity confirmation via unit root tests. Model selection was based on the Akaike Information Criterion (AIC), adjusted R², and parameter significance, while diagnostic tests ensured residuals were stationary, normally distributed, homoscedastic, and free from autocorrelation. The Theil inequality test further validated the predictive accuracy of the models. Forecast results indicate moderate fluctuations in economic growth, with alternating periods of slight contraction and modest recovery, while inflation is projected to rise steadily, reaching approximately 7.8% by 2032. These findings highlight the effectiveness of ARMA and ARIMA models in capturing Libya’s macroeconomic dynamics and demonstrate their utility as evidence-based tools for strategic economic planning in contexts characterized by volatility and uncertainty.