STAY STRONG
While the economy remains well grounded due to the continued inflow of remittances and its solid financial system, the Lebanese public is increasingly showing its frustration at continued political deadlock.
For Lebanon, fate has often been a cruel mistress. Personified, the country wouldn't look out of place as the lead in a Greek tragedy; having gotten back on track following the 2006 Lebanon War between Israel and Hezbollah, crisis in Syria has stretched public services to breaking point as the country struggles to support the over 1 million refugees in the country. Summer then welcomed fresh strife, when frustrations over political stagnation came to a head as the authorities failed to tackle a refuse crisis, resulting in public protests that even the most disengaged observer could see was about more than just the mounting piles of rubbish on the streets.
A fundamental disagreement between the two main coalition parties—the March 8th Alliance, supported by Shia Iran, and the March 14th Alliance, with foreign endorsement from the West and Saudi Arabia—over which side to back in neighboring Syria's civil war means Lebanon has been sans President since April 2014, having failed on 15 occasions to elect a new head of state. Cast an eye over the economy, however, and it becomes clear that no amount of political foot dragging will slow things down for long.
According to the IMF, the Lebanese economy is set to grow 2.5% in 2015, up from the 2% growth seen in 2014 and 0.9% in 2013. Foreign reserves stand at $38 billion, while debt-to-GDP has exceeded 145%, in line with a widening of the fiscal deficit, predicted to reach 10.8% of GDP by end-2015 as the influx of refugees puts pressure on state finances and pushes Lebanese workers out of the informal sector.
The country also runs a current account deficit, which in 2014 stood at -24.9%, expected to narrow a tad to -22.2% this year. While appearing alarming at first, driven by Lebanon's high dependence on imports, the deficit is somewhat covered by capital inflows, propelled mainly by remittances made by the hefty Lebanese diaspora and the spoils of commercial banks operating abroad.
The import bill has made for more pleasant reading of late, however, thanks to the fall in oil prices; in 2012, oil imports ran up a price tag of $5.9 billion, or 27.6% of total imports. Just three years later, with prices nearly half of 2012's $111.67 average price for a barrel of Brent crude, the national bill for oil imports could fall by up to $2 billion in 2015. Ever untrusting, however, public observers in the country have suggested that cheaper oil imports will only benefit utility firms. Further into the future, however, Lebanon itself could become a significant exporter of hydrocarbons, following seismic data that suggests offshore energy reserves include more than 120 trillion cubic meters of natural gas, with a Global Risk Insights report suggesting extraction could yield $100 billion over the next two decades.
Back to the financial sector, and with the Lebanese pound pegged to the dollar, the banking industry remains well capitalized and the bedrock of the economy at large, mainly thanks to the central bank (BDL), which has maintained a prudent fiscal policy framework. As of early 2015, assets in the banking sector stood at $176.6 billion, up 0.9% from December 2014, while bank deposits climbed 6% to $151 billion at end-2014 with a dollarization ratio of 65.7% The BDL is also keen to maintain lending to the private sector, which is considered the engine of the economy in absence of an organized government. Thanks to incentive packages, loans made to private entities were up 7.5% YoY by end-January.
The business community's response to the Syria crisis has also been fascinating, with various industries finding new avenues of growth in a difficult environment. Most surprisingly, tourism picked up over 2014 as arrivals grew 6.3%, following a drop off of 6.7% in 2013, according to the World Bank. Then, in the first five months of 2015, the number of visitors came in at 524,334, up 18% from the same period in 2014. And in case you were wondering who is choosing to visit Lebanon in spite of security concerns in the wider region, the figures suggest the country still wields broad appeal, with the number of Arab tourists up by 19%, Europeans by 15.3%, Americans by 17.3%, Africans by 43.6%, and Australians by 29.4%.
Elsewhere, cement deliveries fell 5.4%, which can only suggest challenges in sourcing as, on the contrary, construction permits rose by almost 5%, having dropped by 12% in 2013.
Manufacturing has borne the brunt of trouble across the border, but if there's one maxim that the Lebanese live by, it's “when life gives you lemons, make lemonade.” In this respect, the lemons represent dwindling demand from Syria, and the lemonade Lebanon's attractiveness as an alternative base for manufacturing, as well a source of imports for countries previously reliant on the now shattered Syria.
Despite plenty of reasons to be gloomy, consumer confidence is anything but—the ARA index rose by 21% in 2014 over 2013, marking a turnaround following negative trends over the previous two years. In this area, too, the Syrian population is beginning to leave a lasting mark. Operating mainly in the informal sector, numerous micro and small businesses selling products at low prices have opened their doors to serve the Syrian community, much to the chagrin of some Lebanese business owners who are unable to compete on price.
Looking ahead, Lebanon desperately needs to end its political stalemate, a major step being the election of a President. And although the appointment would not quite be a panacea, it would go a long way to assuring investors that Lebanon is back on track and give the economy a much-needed shot in the arm.
STAY STRONG
TABLE OF CONTENTS
Review: Diplomacy
Root & Branch
The Syrian asylum crisis dominates headlines, yet Lebanon is using its political influence more widely, and is utilizing its diaspora to good effect. Meanwhile, the government is striving to reform itself amid pressures for greater effectiveness, yet even here the ongoing war in Syria risks a paralyzing political impasse at home.
read articleGuest Speaker
The Hon. Julie Bishop, Minister , Foreign Affairs, Australia’s Federal Coalition Government
TBY talks to The Hon. Julie Bishop, Minister for Foreign Affairs, Australia's Federal Coalition Government, on areas of cooperation and ways in which both countries are working to support the region.
read articleFocus: Syrian Asylum Crisis
Seeking the Cedar’s Shelter
The impact of Syria's crisis on the economic and social stability of Lebanon has been profound, with over 1.18 million displaced Syrian nationals now living among the 4 million Lebanese population, Lebanon has the highest per capita concentration of refugees worldwide.
read articleGuest Speaker
Abdallah Al Dardari,, Deputy Executive Secretary, UN Economic and Social Commission for Western Asia (UN-ESCWA)
TBY talks to Abdallah Al Dardari, Deputy Executive Secretary of the UN Economic and Social Commission for Western Asia (UN-ESCWA), on the participation of women in the economy and the workforce and regional integration.
read articleInterview
Dr. Freddie C. Baz, Vice Chairman and General Manager, Bank Audi
TBY talks to Dr. Freddie C. Baz, Vice Chairman and General Manager of Bank Audi, Group Strategy Director, on the Bank's contribution to Lebanon's economy, its regional diversification strategy, and Odea Bank's expansion in Turkey.
read articleInterview
Saad Azhari, Chairman & General Manager, BLOM Bank
TBY talks to Saad Azhari, Chairman & General Manager of BLOM Bank, on increasing their market share and maintaining a strong regional presence amid the global financial crisis, the Arab Spring, and ongoing instability in Lebanon.
read articleFocus: Lebanese Banks Abroad
Across the Globe
In the era of globalization, Lebanese banks are trying to take advantage of several opportunities, not just in terms of satisfying the needs of a large Lebanese diaspora, but also by filling the niche for anyone who needs optimum banking products and service delivery.
read articleInterview
HE Minister Arthur Nazarian, Minister , Energy and Water
TBY talks to HE Minister Arthur Nazarian, Minister of Energy and Water, on the balance between traditional and renewable energy sources, incorporating wind into the country's energy portfolio, and how the government supports private sector investment.
read articleFocus: Green Spaces
The Other Side of The Fence
The Beirut Municipality has launched the “Beirut is Amazing" campaign, created to invite all independent organizations, private companies, and educational institutions interested in developing green spaces to collaborate with the municipality.
read articleFocus: Beer Culture
Brewed Force
Ever since the first Lebanese beer was produced in 1933 by Brasserie Almaza, the local beer market has been dominated by one single brand. To most Lebanese, Almaza has been synonymous with beer. However, over the past nine years, a new craft beer movement has been challenging the status quo of the Lebanese beer market with newly established brands, introducing new beer styles and more diverse tastes.
read articlePhoto Essay: Reconstruction of Beirut
Building Up Downtown
What is now a beautiful downtown was not so long ago a wasteland of scorched buildings and rubble from a civil war that plagued Lebanon from 1975 to 1990, totally destroying an area known for its picturesque Mediterranean vistas and Roman and Mamluk ruins.
read articleFocus: Restoring Tripoli’s Reputation
Not So Secondary
In a drive to create the conditions for increased local economic development and enhanced quality of life, the Cultural Heritage and Urban Development Project has been launched by the World Bank to improve the conservation and management of Lebanon's built cultural heritage and boost the development in country's secondary cities.
read articleInterview
Salam S. Rayes, CEO, Saint George Hospital University Medical Center,
TBY talks to Salam S. Rayes, CEO of Saint George Hospital University Medical Center, Beirut, on the role of R&D at the hospital, the challenges faces the health sector, and Lebanon's potential to become a medical hub for the region.
read articleInterview
Irina Bokova, Director General, UNESCO
TBY talks to Irina Bokova, Director-General of UNESCO, on the organization's campaigns to protect and promote Lebanese heritage, expand educational programs in the country to serve Syrian refugees, and celebrations for UNESCO's 70th anniversary.
read articleInterview
Hamed Al Hammami, Director, UNESCO’s Beirut Office
TBY talks to Hamed Al Hammami, Director of UNESCO's Beirut Office, on their projects in the fields of culture, education, human rights, freedom of expression, and youth in governance across their regional mandate of Lebanon, Syria, Jordan, Iraq, and the Palestinian Territories.
read article