Lebanon sees economy growing 1-1.5 pct in 2012

BEIRUT Tue Nov 20, 2012 12:21pm EST

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BEIRUT Nov 20 (Reuters) - Lebanon's economic growth will slow to between 1 and 1.5 percent this year because of the Syrian civil war and domestic political instability, but will pick up to at least 2 percent in 2013, the finance minister said on Tuesday.

Mohammed Safadi told Reuters that any improvement in domestic politics, which have been roiled by the Syrian conflict and the assassination of a top Lebanese intelligence official last month, could revive the economy.

"We have a lot of problems that we are facing and we have obstacles. But at the same time I confirm that the financial situation in Lebanon is very sound and confidence in Lebanon remains," he said.

Lebanon saw rapid growth of around 8 percent for four years until 2011. Economy minister Nicolas Nahhas has said gross domestic product grew 5.2 percent in that year, but many businessmen and analysts doubt that number and the International Monetary Fund has put 2011 growth at 1.5 percent.

The IMF said in September that poor government economic policies have contributed to a slowdown of investment in Lebanon; businessmen complain that the government, constrained by sectarian rivalries, has been slow to reform state finances and improve infrastructure.

Prime Minister Najib Mikati's government has said parliamentary elections scheduled for next year will go ahead despite the political tensions, however, and Safadi said the polls could prove an important boost for the economy.

"Our economy is very small. An issue moves it up and another issue moves it down because it is small...But a change in the government and (having) a government with a national political agreement would shoot up the indicators overnight, and Arab investment would return to the country."

The state budget deficit is expected to widen to $3.5 billion this year from $1.8 billion last year, while public debt is projected to increase by more than $2 billion to $56 billion in 2012, Safadi said.

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