General View on Economic Improvement in Lebanon

It has been obvious and clear that Lebanese economy has surpassed local unstable political situation and the global financial crisis in the past years; thanks to the careful and smart monetary policy of the central bank (that avoided much investment in highly risky financial tools and kept away from giving loans without taking adequate guarantees and making enough assessment for each bank customer who requests a loan). The governor of the central bank, Riad Salami, has been rewarded an international prize because Lebanese banking management and system have been proved successful. Besides, Lebanon has been one of few countries in the world that has had an economic growth of 9% and 8% in 2008 and 2009 respectively.

Since the political agreement and consensus among different conflicting political parties in May 2008 that took place in Doha (Qatar), bank deposits increased much. As an example, bank deposits have risen by $22 billion in 2009 due to capital flow from abroad. Bank deposits continued as well to grow in 2010 leading consequently to enlarge bank cumulative assets in the whole country to $ 125 billion (i.e. more than 3 times the real GDP of Lebanon). This is one reason that Lebanese banks are encouraged to expand offshore as in Europe, Middle East and North Africa giving them further growth, base and diversification especially that Lebanon is a small country.

Another proof of economic improvement and strength is that interest rates on bank deposits have dropped in the past 2 years from 9% to 6% on Lebanese Pound deposits and from 6% to 3% on US Dollars due to the increased abundance in liquidity since the end of 2008. The above means less risk and a reduction in public debt service by almost $350 million yearly. Standard and poor’s raised up the rating of Lebanon from B- to B. On the one hand, there was a drop in the ratio of Public debt/ GDP in Lebanon from 180% in 2006 to 150% in 2010. There was improvement in the balance of payment and reduction in budget deficit from 26.8% in the first half of 2009 to 17.43% compared to the same period in 2010. Another positive economic indication is that tourism spending inside the country has increased from $4 billion in 2008 to $7 billion in 2009. Industrial exports have increased 35.6% from $1.516 billion in 2009 to $2.056 billion in 2010 comparing the first 7 months of both years. The construction sector has thrived due to increased investment in construction buildings and houses that are demanded a lot by Foreigners and Lebanese citizens living outside their country. These show some accomplishments and developments in the last years.

However, despite theses great economic achievements, the greatest challenge according to the World Bank is to make certain structural reform and development programs in public sector and infrastructure especially electricity and social security in order to maintain sustainable and persistent economic growth in the long run, increase efficiency, reduce the high public debt/GDP ratio down from 150% recently, and cut down budget deficit. Another challenge in the Lebanese economy is subsidizing and supporting productive sectors especially industry to improve balance of payments because Lebanon imports manufactured goods about 5 or 6 times more than it exports (Lebanon relies mostly on services and tourism). Finally, all mentioned facts should be important motivational forces giving the nation hope for a better future, economy and social welfare.

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