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National economy in Lebanon vacillating, banking sector safe and sound
Thu 21 Aug 2014 at 18:06
Written by Joseph Farah
Translated by Rabab Housseiny
NNA – Lebanon’s national economy is to oscillate between up and down nowadays, just like previously, due to the reverberations of the internal political quandaries, the lack of stability and security with the exacerbation of the Syrian crisis and the massive influx of some 1.5 million refugees, that is, more than 37% of the Lebanese population.
The “ups” started when the national interest government was formed and when the Gulf reneged on its decision hereby banning its national from traveling to Lebanon, in addition to the three-billion-dollar donation by Saudi Arabia to Lebanon’s army, and the return of former Prime Minister Saad Hariri to the country.
The “downs” are embodied by the failure to fill the presidential vacuum, the terrorist operations that continue to take place in some regions and their repercussions on the various economic sectors including the tourism one, the pending effectiveness of the Saudi donation, the growing unemployment ratio and the failure to create an atmosphere that is suitable for investments.
Ups and downs! This means continuous exhaustion of the Lebanese national economy which has become tightly linked to the political and security developments in the country and the neighborhood.
In its latest report, the International Monetary Fund tackled the dangers and the weakness of the public finance. This means delay in implementing the structural reforms and a rise in the interest rates. The IMF also shone light on the public debt which is to constitute 150% of the GDP and the deficit in electricity amounting to 3100-billion-LBP per year.
The economic activity in 2014 is expected to remain ailing amid the absence of any positive signs to solve the crises in Lebanon and in Syria. Besides, growth is expected to reach 1.8 % this year and 2.5% next year.
However, nothing harbingers on improvement at the real economic sectors for the rest of the current year, with many local and international reporters pointing out that the economy is to remain ailing pending positive political and security shocks like the election of a new president of the republic, and curbing the reverberations of the Syrian crisis on Lebanon.
In the commercial sector, markets reinvigorated with the formation of the national interest government and the cancellation of the Gulf travel warrants to Lebanon. Nonetheless, trade activity was held back with a degradation that amounted to 13%.
According to the index of Beirut Merchants Association, a 37.14% decrease in the pharmaceutical products sales was noticed, while the sales of cell phones declined to 29,41%, those o]f books and newspapers dropped by 24,57% and so on…
As to the Lebanese balance sheet, deficit exceeded USD 8.62 billion, due to a drop in exports.
China tops the countries exporting to Lebanon while South Africa is number one importer from Lebanon.
The political sector, for its part, was dealt a huge blow due to the many terrorist operations since the beginning of the summer, which held back tourism, despite the efforts exerted by the Ministry of Tourism through launching Live Love Lebanon campaign and the tourism packages. A report by Ernst&Young indicated that hotel occupancy ratio reached 49% in Beirut for the first half of the current year, which means more delay, noting that economy highly depends on this sector.
Moreover, Lebanese industrial exports dropped by 17, 03%.
Furthermore, the statistics made by the General Directorate of the Real Estate Affairs show degradation in the performance of the real estate sector in Lebanon. This proves the absence of foreign investments, which led to the stagnation of the real estate activity except for the operations taking place through the Lebanese expatriates willing to buy apartments in Lebanon.
It is to note that there has been no budget for the year 2014, with a public finance deficit reaching 11% of the GDP and a public debt that will soon amount to 150% of GDP.
In addition, the Lebanese pound is still stable owing to the reserves of bdl which amounted to USD 37 billion and as a result of high liquidity in foreign currency.
For its part, the banking sector is to preserve a 7% growth, because of the confidence of the depositors in the sector’s resilience.
In a nutshell, the economic indicators are worrisome, except for the banking sector.
Financial expert Dr. Ghazi Wazni indicated that the 2014 economy is “dark” and affected by the internal and regional political developments and due dates.
He also noted the absence of a new budget, whereas expenditures are being effectuated on the 12-month rule with ailing ratios of deficit and public debt.
“It is deplorable that the year 2014 would not witness any improvement on the level of oil and gas dossier due to the quandaries among the political forces,” he regretted.
He went on to say that the return of former Prime Minister Saad Hariri to Lebanon spread a certain détente in the country which had positive effect on the economic and financial situation.
Improvements were mainly clear in Beirut stock market especially on the level of SOLIDERE shares. Nevertheless, this positivity may be trimmed down during the upcoming months if political disagreements remain unsettled. “The return of Hariri is positive within the long-run and linked to his achievements in the forthcoming months,” he stressed.
In turn, Head of the Economic Committee, former Minister Adnan Qassar, maintained that the Lebanese national economy did not demonstrate string resilience in the face of the internal and external unprecedented challenges, noting that growth will make no progress this year comparing to 2013.
But he said advantages could be taken of the growing deposits and capitals at the banking sector, in addition to the continuous construction movement at the real estate segment.
“Scoring a strong economic rise requires an adequate political climate on which the private sector hinges,” he said, highlighting the necessity of electing a new head of state in the nearest time possible, enhancing democracy by abiding by the constitutional due dates, dauntlessly seeking to proof Lebanon in the face of the repercussions of the regional conflicts and rallying around the military and security forces.