Lebanon's economy continues to find new ways to grow despite regional challenges, yet deadlock at the top level of politics remains a barrier to reform.

GDP growth slowed a touch in 2015 to 1.5% YoY, following 1.8% in 2014. The World Bank, however, projects a return to 2014 levels of growth for 2016. This is despite the arrival of over 1 million Syrian refuges into the country—Lebanon's population was previously just over 4 million—and the loss of the country's main export route: Syria. Lebanon's economy is shored up by a strong banking sector—bank assets to GDP stands at around 345%—and a steady stream of remittances from its diaspora, which is over twice the size of the population of the country itself. The influx of refugees from Syria has taken its toll, stretching public services. Mountains of trash built up across the capital, Beirut, in early 2016, leading to protests that blamed mismanagement at the top of government. And despite subsequent efforts to open new landfills, the public remains frustrated at the political deadlock caused by the failure to elect a new president. The country's last president, Michel Suleiman, finished his tenure in May 2014, and since then over 30 attempts have been made to elect a successor in parliament, which is split between Christian, Sunni, and Shia coalitions. At the economic level, the deadlock was reflected in the World Economic Forum's 2015-2016 Global Competitiveness Report, which cited government instability as the number-one barrier to doing business in Lebanon.

Lebanon is far from lacking leadership, however, and in terms of economic resilience the Banque du Liban (BDL), the country's central bank, has looked to show the way. Since 2013, when external pressures pulled the economy off the tracks, the BDL has injected four stimulus packages of USD1 billion a year in the form of soft loans to Lebanese banks in order to boost lending activity. Sectors that have benefited include housing, education, and renewable energy, but also the high-tech sector, especially through the encouragement of entrepreneurialism. One such effort is Circular 331, a BDL initiative that pumped USD400 million into the local enterprise market and guaranteed 75% of banks' investments in startups. The initiative has helped to generate jobs and allow firms to pay the kind of wages necessary to keep talent within Lebanon. Going forward, the BDL “has a firm commitment to renew these stimulus packages as much as it is needed with the aim of strengthening economic and social stability in the country," Governor Salameh told TBY in an interview.
And for high-tech sectors such as IT, the outlook is good. An expected CAGR of around 9.7% from now until 2019 will see the sector grow from a value of USD436 million to upward of USD540 million, mostly the back of long-awaited upgrades to infrastructure, including the 2020 Telecom Vision initiative, which seeks to extend a 4,700km nationwide fiber-optic network. Future success will, however, depend on Lebanon's long-term potential to retain its highly skilled workforce.

Other sectors, such as transport, have more grounded concerns. War in Syria effectively cut off Lebanon's only land-based export option, pushing exporters toward ports and airports. Ever a people to jump on opportunities, however, plans are already under way to upgrade the country's maritime infrastructure. Under the spotlight is the Port of Tripoli, the second-largest sea port in Lebanon. Located within a 150,000sqm free zone, the port is getting a new, 600m-long berth for container trade. Located just 30km from the border with Syria, it is hoped that the port will become a key hub for regional imports once peace comes to Syria and the reconstruction effort begins.

The tourism industry also had cause for panic as external developments continued to paint the region in a negative light. That said, in 2015 the sector made a contribution to GDP of an impressive USD9.9 billion (22.1%), of which 36.6% was direct. A further 16.4% of the figure came from spending, of which 80% was carried out by foreign visitors, and the remaining 47% in the form of supply chains, investment, and government collectives. And the troubles have certainly not kept the tourists away; in 2016, total contribution to GDP is expected to grow by 5.3% to USD10.6 billion. Over the next 10 years, the WTTC projects the contribution to increase at 6.8% per annum, reaching USD26.3 billion by 2026 and thus representing a hefty 30.6% of GDP.
All being said, Lebanon, as ever, is in a better position than its external conditions dictate it should be. And as ever, a solid banking sector and keen fiscal management are to thank. Moving forward, Lebanon is set to play a key role in post-conflict Syria, yet in the short term it must look to circumventing the political impasse in parliament if it is to ensure the kind of stability businesses need to invest on surer footing.