(Reuters) - The economy of Lebanon, which held a parliamentary election on Sunday, has shown what the International Monetary Fund (IMF) has described as “remarkable resilience” in the face of the global financial crisis.
Following are some of the economy’s main features:
The economy grew more than 8 percent in 2008 according to the IMF, despite a first half marred by the worst internal fighting since the 1975-90 civil war and the onset of the global financial crisis. Policymakers project growth of 4 percent or more in 2009.
Lebanon’s public debt burden is one of the heaviest in the world at around 162 percent of gross domestic product (GDP), much of it incurred as a result of reconstruction after the civil war. The debt was measured at $47.21 billion in February, around 44 percent of it in foreign currency, according to the finance ministry. The government has cited progress in reducing the debt-to-GDP ratio to 162 percent from around 180 percent in 2006. Moody’s recently upgraded Lebanon’s sovereign ratings, citing a substantial improvement in its external liquidity and the proven resistance of public finances to shocks. The state’s deficit for 2009 is projected at around 12 percent of GDP.
The banking sector is a major pillar for state finances. The banks’ deposit base, which grew 15 percent in 2008, is forecast to increase 12 percent in 2009, the central bank governor said on May 20. Lebanon’s three biggest banks each recorded double-digit profit growth in the first quarter — results which Moody’s Senior Analyst and Vice President Tristan Cooper said bolstered the view that the local banks would remain resilient. Tight regulation shielded the sector from the financial crisis.
Expatriate remittances account for around a fifth of Lebanon’s economy. Some economists predict transfers will fall because of the global economic slowdown, though policymakers have pointed at a balance-of-payments surplus in the first quarter as proof that Lebanon is still reaping a capital inflow.
Year-on-year consumer price inflation fell to 2 percent in April from double digits last year, according to central bank data. Lower fuel and commodity prices have helped curb inflation.
The central bank has repeatedly stated its aim of keeping interest rates stable to preserve liquidity levels. The IMF has urged a cautious approach to interest rates to support deposit inflows and de-dollarisation of bank deposits.
Writing by Tom Perry; Editing by Alistair Lyon