Written by Joseph Farah
Translated by Rasha Zantout
NNA – Politics continues to drain the national economy of Lebanon, which was also hit hard by the repercussions of the Syrian crisis. The growth percentage for this year did not exceed 1.5% despite aid by Bank of Lebanon through stimulus packages pumped into the market through the banking sector. It is to be noted that the International Monetary Fund cut its previous forecast on the growth rate to 2 percent.
The presidential seat continues to be empty in 2015, which has a negative domino effect on the work of the Cabinet of “national interest,” the parliament and all other Constitutional Institutions. The call issued by the economic bodies and civil society on June 25 to face this suicide was lost as the economy continued to roll down the abyss.
Lebanon is not short on crises, from electricity to garbage, to unemployment and the influx of displaced Syrians. The public debt has exceeded 70 billion US Dollars.
The economic sectors lost 85% of Lebanon’s exports, which used to pass through, the now closed, land passage between Jordan and Syria. The banking sector, however, forms a positive leverage to these sectors. It sustained a growth of 8% despite a decline in loans. The reserves at the Bank of Lebanon have increased to 50 billion dollars, which provides financial stability and indicates the Bank’s discipline.
Vice-President of the Association of Banks in Lebanon, Saad Al Azhari, considered the performance of the banking sector as “acceptable, despite political and economic turmoil.” However, Azhari dubbed “modest” the growth ratio of banking activity compared to the previous decade.
Audi Bank had a different view point. According to a report by the Bank, the Lebanese economy was still capable of facing challenges. This sector could also save Lebanon from the trap of stagnation.
While it was true that Audi Bank depended on assets present in Lebanon, there were multiple others assets that the state has yet to make use of. Such assets were petrol and gas. However, they remained untouched due to political dispute. This left the economy short of accomplishing its full productive potential.
One life line that Lebanese economy depended on was the money inflowing from abroad which was estimated at eight billion USD annually.
Tourism in Lebanon has suffered greatly as well, despite a colossal effort by the civil society to launch over 100 local and international festivals. The sad numbers, however, show that touristic spending has receded from seven billion USD to four, mainly with the continuous Gulf boycott for tourism in Lebanon. The occupancy at hotels dropped back from 100% to 60%. Yet, activity at Rafik Hariri International Airport has improved since last year.
The industrial and agricultural sectors also lost a lot with the closing of the crossing between Syria and Jordan. The Lebanese state adopted exporting via sea. Although exports dropped 15% and 10% in the agricultural and industrial sectors consecutively, domestic consumption has risen with the presence of over a million and a half Syrian refugees in the country.
The real estate sector has slowed down greatly, pushing some real estate developers to launch promotional campaigns for resident and immigrant Lebanese to buy apartments in their homeland. It is to note, however, that the prices of homes and real estate in general have not dropped, except for some discounts for new buyers wishing to conclude their contracts.
The investment sector has not witnessed any exceptional deals, except for those started in 2010, the date of the investment boom. During that time, Lebanon ranked fourth among Arab countries in investment activity.
The public deficit is expected to increase in 2015, according to the budgetary project presented to the Cabinet by the ministry of finance.
Economic and financial expert, Dr. Ghazi Wazzni, confirmed that the national economy was passing through a “foggy and difficult phase, due to charged atmosphere in the region and the paralysis of domestic Constitutional institutions.”
Wazzni asserted that the billion USD in easy loans pumped into the economic and real estate sectors by Bank of Lebanon was the main factor in activating the economy into modest growth rates. The economic expert, nevertheless, was not optimistic about the monetary situation. He noted that financial deficit has registered “alarming levels that exceed 10% of the local production, due to a Cabinet decision to up the number of its employees by 10%” along with other aforementioned factors that weigh down on the economy.
“The public debt is expected to continue in its inflation rate to exceed 71 billion USD by the end of 2015.”
Wazzni, however, forecasted a solid presence for the banking sector in 2015 with an acceptable growth rate of 7%.
Chairman of the Beirut Merchants Association, Nicholas Shammas, described 2015 as a “disappointing year for Lebanon.” Despite the optimism that came by the formation of the national interest Cabinet, two factors hindered economic growth.
“First the abduction of Lebanese servicemen in Arsal, and the second is presidential vacancy.”
Shammas attributed the faltering of the economic situation to the infringement of displaced Syrians on the job market in Lebanon, as well as “persistent Arab boycott of Lebanon.”
He noted that the loss of trust in the future of Lebanon’s economy foreshadows a transformation of the crisis from being momentary to “organic.”
“Politicians…are wasting opportunities presented to them on a silver platter to fortify the economy.”
Lebanese Businessmen's Gathering President, Fouad Zmokhol, said that he expected the economic situation to be dire due to paralysis in state institutions and failure to run the state. This indicated a freeze on all decisions and an inability to resolve crises, such as the garbage issue, although an executive decision was taken for it.
“Investors have lost their trust, which led to a decrease in foreign investments in Lebanon from 4.8 billion USD in 2010 to 2.5 billion USD in 2015.” Many of these investors, according to Zmokhol, took their business elsewhere.
He asserted that the social situation is tightly linked to the issue of displaced Syrians and their direct effect on the general situation.
Chairman of the Economic bodies and president of the Federation of Chambers of Commerce, Industry and Agriculture in the Arab world, former Minister Adnan Kassar expressed his discomfort towards the way political matters were weighing down on the socio-economic situation, and putting the country in danger for the sake of “narrow interests.”
“The social situation isn’t doing well either, as unemployment has almost exceeded 25% in 2015.”
Kassar noted that yearly job opportunities were at a mere 5000, while Lebanon’s work force required five times that number.
Despite the doom and gloom, Kassar was confident that things could go back on the right track of growth that was fit for Lebanon, especially that “we have the necessary means for it.”