The International Monetary Fund has delivered a stark assessment of Lebanon’s economy: Growth is subdued, fiscal imbalances are widening, and public debt is rising.
The Lebanese economy expanded by 2.5 percent in 2012 and slowed to just 1.5 percent in 2013, according to the IMF. The country’s traditional pillars of growth — real estate-related activity, construction and tourism — have wilted in the face of increasing political uncertainty and a worsening security situation. And if anemic levels of growth weren’t cause for concern alone, Lebanon’s external current account deficit was an eye watering 13 percent of GDP in 2012–13.
- An unprecedented inflow of Syrian refugees is putting a strain on Lebanon’s economic and social structures, IMF says.
- Associated Press
To be fair, not all of Lebanon’s economic woe is self-inflicted. The crisis in Syria is having a dramatic impact on the country. According to some estimates, Lebanon is now home to more than one million refugees from Syria – that’s about a quarter of its entire population.
“Without a resolution in Syria, economic performance is expected to remain weak, with high downside risks from a further weakening of public finances and delays in structural reforms,” the IMF said in its recent Article IV consultation report. “Growth is likely to be subdued at around 2 percent this year, reflecting domestic and regional uncertainties, and return only gradually to potential — a moderate 4 percent.”
The IMF commended Lebanese authorities’ efforts for receiving an unprecedented inflow of Syrian refugees, recognizing the strain this puts on economic and social structures and its contribution to already high unemployment and poverty. To help counter this, Lebanon needs additional support from the international community to address the adverse impact of the refugee crisis, the IMF said.
Lebanon’s growing refugee problem has also served to exacerbate domestic political uncertainties. The term of the country’s president ended in May, and the presidential vacuum is disrupting efforts to pass legislation, including a salary increase for the public sector, the IMF said.
“Parliamentary elections in November [already postponed from June 2013] add to uncertainty,” it noted.
To achieve sustainable economic growth and improve social conditions Lebanon should commit to sound macroeconomic policies and structural reforms, the IMF said. In this context, it urged Lebanon to implement a planned salary scale adjustment for public sector employees, and underscored the need to reform the country’s electricity sector by raising average tariffs. Additional efforts are also needed to enhance labor markets and support job creation, while strengthening social safety nets, it said.
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(via WSJ Blogs)
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