Political crisis in Lebanon taking toll on economy

The head of research at Byblos Bank Nassib Ghobril said on that ongoing delays in forming the Cabinet have started to have an impact on economic activity in the country, which puts at risk the expected growth of 7 percent for this year.

“Indicators are showing a slowdown in activity, with the coincident indicator, a measure of economic activity in the country, showing a month-on-month decline in August and stagnation since June,” Ghobril told participants in the Lebanese-Dutch Business association conference in Beirut.

He added that consumer confidence has declined in July, August and September.

“Although these are just two indicators, they provide an early warning of the potential ramifications of the four-month old Cabinet crisis on the economy if the crisis continues to drag on indefinitely. The expectations of 7 percent growth for this year puts Lebanon with the second best real GDP growth in the Arab world after Qatar, but the forecast for 2010 shows a slowdown to a 4 percent growth rate, making Lebanon the 8th best-performing economy in the region,” Ghobril said.

But he indicated that the differential in expected growth for the Lebanese economy between 2010 and 2009 is the widest among all Arab countries, which adds to the urgency of implementing reforms in order to improve the economy’s competitiveness and growth prospects. He added that the statistical base of the Lebanese economy is weak, as most sectors do not produce regular indicators.

Ghobril stressed that it is important to improve the country’s statistical capacity in order to give a clearer idea about the performance of the Lebanese economy, as well as to raise the overall level of transparency.

He noted that the latest report of the International Monetary Fund (IMF) called for significant improvement in Lebanon’s statistical system.

“For example, it said real sector statistics should be compiled on a timely basis, while the development of comprehensive statistics for the real estate sector and the labor market would constitute key improvements. The IMF also called for increased resources for the compilation of balance of payments figures,” he said.

Ghobril also stressed that the recurrent political crises in the country are costing the Lebanese economy in terms of wasted opportunities despite the fact that the economy has proven that it can compete regionally to attract capital, tourists, and companies.

– The Daily Star