Lebanon growth forecast raised to 6 percent

Regional investment bank EFG Hermes raised its forecast for Lebanon’s economic growth from 4 percent to 6 percent for 2009 and from 3 percent to 4 percent for 2010, as reported by Lebanon This Week, the economic publications of the Byblos Bank Group. It attributed the upward revision in real GDP growth to Lebanon’s impressive economic performance so far this year, adding that the country continues to benefit from an ongoing “peace dividend” following the election of President Michel Sleiman in May 2008 and peaceful parliamentary elections in June 2009.

It considered that a solid banking sector and the rebound in oil prices since the beginning of the year are supporting deposit growth and the tourism sector. However, it had low expectations about the implementation of economic reforms in the short to medium term, and expressed concern about the fiscal balance and debt ratios.

It noted that a strong year for tourism and relative stability in remittance inflows are supporting private consumption growth in 2009, as tourism arrivals reached a record 1.1 million year-to-July and are expected to total about 2 million for the year compared to 1.3 million tourists in 2008.

It added that the strong tourism season, along with strong capital inflows, have contributed to a balance of payments surplus of $3.3 billion in the first seven months of the year, double the surplus posted in the same period last year.

It noted that the year-to date surplus took place despite a 5.7 percent widening of the trade deficit due to solid non-oil-import growth of 15 percent year-on-year. It added that the large balance of payments surplus, in addition to recent comments from the central bank, indicates that remittances have probably continued to grow in 2009, possibly due to the relative stability of GCC economies where a large base of Lebanese expatriates live.

EFG Hermes projected the inflation rate at 4 percent at the end of 2009 and at 5 percent at end-2010. It forecast the annual growth of broad money at 11.4 percent in 2009 and 7.7 percent in 2010, up from earlier projections of 8.1 percent for this year and 6.7 percent next year.

It also projected private-sector lending to grow by 15 percent in 2009 and 12 percent in 2010, up from an earlier forecast of 8 percent credit growth this year and 10 percent next year. In parallel, it forecast a fiscal deficit of 11.8 percent of GDP in 2009 and 10.3 percent in 2010.

It also expected the external debt to decline to 67 percent of GDP by end-2009 and to 62.3 percent of GDP by end-2010. 

–The Daily Star