Economy continues to bleed with no glimpse of hope as GDP deteriorates, debt values 75 billion, and displaced pressure mounts

Mon 08 Aug 2016 at 10:37 Know Lebanon

Written by   : Joseph Farah

Translated by: Lina Yahya Raydan

Economists in Lebanon try to hang to any glimpse of hope to keep the economy at its current status-quo without additional deterioration and recession. They are trying hard to do so in the absence of any brisk of light that enables this economy to reactivate its various sectors  and amid a blocked political horizon to put issues back on the right track , starting from the election of a new president to the growing pressure which Lebanon shoulders as a result of the increase in the number of displaced Syrians and the high expenses of their presence in the country, especially that they are taking the place of the Lebanese labor – they replaced 25% of the Lebanese labor according to Labor Minister Sejaan Azzi and 37% according to a statement issued by the General Labor Confederation (GLC).

If the state cannot carry on its duties without the presence of a president--as for the work of the constitutional and administrative institutions, then the absence of a budget since 2005 and the implementation of the provisional twelfths system are two main reasons to the fiscal deficit, the accumulation of public debt which exceeded USD 72 billion and the lack of control over public spending.

The Central Bank of Lebanon is the only party that still offers initiatives and provides incentive packages which keep GDP above zero level.

It is worth noting that GDP valued in 2010 to 9%; a percentage which clearly reflects the negative impact of the presidential vacuum on the Lebanese economy from one side and that of the regional repercussions mainly of the Syrian crisis as the number of the displaced Syrians exceeded one million and a half from another. This number imposed a huge burden on the Lebanese infrastructure and labor amid the deterioration of the international aids and the absence of solutions for the escalating Syrian problem.

The economic deterioration in Lebanon has reached red lines amid the increasing general debt which is expected to reach $75 billion, the decline of the direct foreign investments and the damage that fell upon various economic sectors which are suffering recession after the closure of the land borders between Jordan and Syria -- Lebanese exportation fell to 30% as a result of that.

Moreover, the real estate sector is still undergoing recession; a fact that urged the Central Bank to perform a salvation process in this sector which included buying and selling thousands of apartments. It is worth to mention that the real estate prices dropped 20% at the latest period.

As for the tourism sector, the spending process has fallen to USD 5.3 billion after it registered 7 billions in 2010.

The tourism minister tried hard to find new markets and encouraged Jordanian, Egyptian and Iraqi markets to open in Lebanon. He also versified tourism from traditional tourism to specialized one, held festivals -- 120 festivals in various Lebanese regions-- and encouraged Diaspora tourism. 

On the commercial sector, things are going “from bad to worse”. Duly, the commercial bodies held a meeting in which they stressed the need to communicate with the concerned officials, especially the Central Bank of Lebanon and the Banks' Association which directly deals with the commercial sectors to manage any delay in paying the dues amid current circumstances.

Only the banking sector is still leverage for the various economic sectors with ongoing growth, which has exceeded 6 percent, despite confronting two crises. First, the repercussions of the USA law against Hizbullah; second, the GDP deterioration, accompanied with the drop of the funding from the Lebanese living abroad, causes profits of this sector to fall 10% from those of last year.

It is true that Audi Bank latest economic report focused on the sources found in Lebanon such as oil and gas, stressing that the agreement between Parliament Speaker Nabih Berri and Free Patriotic Movement head Gebran Bassil in this context removed many obstacles in preparation to endorse the related law in the cabinet. But these sources will not appear overnight and some sides noted that the exploration of these petroleum derivatives need years before they would help the national economy to rise and shun the country falling again into recession.

Commenting on the economic situation in Lebanon, head of the Social and Economic Council Roger Nasnas considered 2016 a tough year on the national economy, noting that no positive change would be seen as long as a new president is not elected.

He added that electing a new president would re-assure the Lebanese and raise the positive expectations of businessmen and investors. This comes under the fundamental relation between politics and economics.

However, economists are trying to find another discussion as to what are the possible procedures that can be done on the domestic and regional levels amid the current political and security situation to deal with the economic crisis and lessen its burden on citizens, an issue that Nasnas has dealt with in his second book "The Rise of Lebanon 2016" in which more than 18 professional economists pinpointed the economic problems that Lebanon is undergoing and stated solutions for them.

Nasnas mentioned in his book that the need demands to start action not only to exit the past problems but also to build the future in a way to embody Lebanon's role in the 21st century.

Nasnas considered in his book that "the means to Lebanon’s renaissance is the developmental integration and social solidarity. Moreover, stable economy demands social security which cannot be accomplished on the account of economic rise."

Nasnas underscored that the latest "consecutive developments that took place in the past few years revealed that the domestic economy and the international one have become connected. They also showed that no current  domestic economy is only limited to the foreign economic process," and Lebanon which overcomes the consecutive crises for 40 years deserves all possible solidarity to start its development march by encouraging competitiveness and supporting the various sectors .

In turn, professional economist Ghazi Wazni said that the "financial and economic situation in Lebanon is still gloomy and foggy due to the ongoing constitutional crisis, complicated security and political situation in the region, little international aids for the displaced Syrians as well as the negative impact of the falling incomes of the oil countries in the region on the Lebanese economy."

He noted that the economic and financial indications of the period that falls between 2010 and 2015 reflect the damages that befell on the main sectors of the Lebanese economy, hence causing decline in its growth.

Commenting on the general financial situation, Wazni expected the state to keep adopting the twelfth provisional system in its spending, an issue that might cause increase in the fiscal deficit.

Wazni seconded Nasnas's opinion that the general debt might reach USD 75 billion which amounts to 140 percent of GDP.

Wazni expected direct foreign investments to decline this year to more than 5% due to investors’ concerns over the Syrian incidents.

Commenting on the displaced Syrians, Wazni described it as the main challenge to the national economy, general financial situation and social situation due to its high expenses which valued this year USD 5.6 billion according to World Bank.

However, Wazni stressed that the Lebanese economy enjoys steadfastness components--including Lebanese Diaspora transactions, the banking sector and the incentive procedures of the Central Bank--which enable it to confront challenges.

"The Lebanese economy is confronting a difficult gloomy stage, yet that can be handled. It just needs interior stability and foreign agreements so as to enable Lebanon to regain its position as a tourism oasis in the region and a resort for good investments," Wazni concluded.

In turn, head of the Lebanese Businessmen Gathering, Fouad Zmokhol, said, "We are in Lebanon confronting four interior and regional wars starting from the cabinet disruption, the parliament paralysis to the social and economic grave crisis which demand an instant positive shock; otherwise, we are heading into an escalated crisis."

Zmokhol noted "we should confess that Lebanon is passing through the most difficult stage in its history over the all levels -- political, economic, security, cultural and social," pointing to the fall of GDP, the increase of the general debt which reached about $70 billion and the private debt which amounted to $55 billion. He noted that the general debt during the Lebanese war 1975 - 1990 did not exceed $500 million.

Zmokhol pointed out that the real strength of the Lebanese economy is the Lebanese Diaspora, stressing the need to approve the main reforms in the state including the election of a new president, forming a new cabinet and carrying out the parliamentary elections based on a fair electoral law.

"Lebanon economy will continue bleeding and the right way to cure it is to elect a new president and solve the Syrian crisis which in turn would solve the displaced Syrians, problem," Zmokhol concluded.

The question remains would the economic bleeding continue in Lebanon?

       =================== L.Y.R

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