São Paulo – A report disclosed last week by the International Monetary Fund (IMF) shows that the Gross Domestic Product (GDP) of Lebanon should grow between 3% and 4% this year. It is more than the growth estimated for 2011, between 1% and 2%, but less than the 8.5% and 7% recorded in 2009 and 2010, respectively. The reason for the lower economic activity was the fall of the coalition government, in January, and the country’s delay to establish new leadership. This, according to the Fund, caused a “shock of confidence” in the markets.
The lower economic activity in 2011 mainly affected the sectors of tourism, retail, wholesale and real estate. "Real Gross Domestic Product (GDP) could grow at 3% to 4% in 2012 but this hinges on strong domestic policies and an improved regional environment,” according to the IMF study. To the institution, the risks of further deceleration of the economy of Lebanon is great because the greater tensions in the neighbouring Syria may have great political and economic repercussion on Lebanon. The country should also not escape the indirect effects of the crisis in Europe.
To IMF technicians, Lebanese authorities now need to maintain fiscal discipline and be ready to adopt contingency plans in case the lower economic activity slows further. They understand that the country needs to lower government spending, create space to increase social spending, make the fiscal policy more balanced and better manage public spending.
"The economy became more resilient in recent years thanks to a marked reduction in the government debt-to-GDP ratio and a build-up of large foreign reserves. Still, government debt at 134% of GDP at end-October 2011 remains among the highest in the world and gives rise to large recurrent financing needs," says the study. In 2009 this debt corresponded to 146% of GDP. In 2012, it should be the equivalent to 132% of GDP.
The IMF suggests that in the medium term, the country should work on reforms to develop its infrastructure. The business climate still needs to improve, to remove labour market interferences and to generate jobs. The study that the IMF developed on Lebanon is developed each year with the member countries of the Fund.
*Translated by Mark Ament
