Economy of Lebanon Information
The 1975-90 Lebanese civil war seriously damaged Lebanon's economic infrastructure, cut national output by half, and had major consequences for Lebanon's position as a Middle Eastern entrepot and banking hub. After the war, the central government regained its ability to collect taxes and control over key port and government facilities. As a result, GDP per capita expanded 353% in the 1990s.[5] Economic recovery has been helped by a financially sound banking system and resilient small- and medium-scale manufacturers, with family remittances, banking services, manufactured and farm exports, and international aid as the main sources of foreign exchange. Lebanon's economy has made impressive gains since the launch of "Horizon 2000," the government's $20 billion reconstruction program in 1993. Real GDP grew 8% in 1994 and 7% in 1995 before Israel's Operation Grapes of Wrath in April 1996 stunted economic activity. Real GDP grew at an average annual rate of less than 3% per year for 1997 and 1998 and only 1% in 1999. During 1992-98, annual inflation fell from more than 100% to 5%, and foreign exchange reserves jumped to more than $6 billion from $1.4 billion. Burgeoning capital inflows have generated foreign payments surpluses, and the Lebanese pound has remained relatively stable. Progress also has been made in rebuilding Lebanon's war-torn physical and financial infrastructure. Solidere, a $2-billion firm, is managing the reconstruction of Beirut's central business district; the stock market reopened in January 1996, and international banks and insurance companies are returning. The government nonetheless faces serious challenges in the economic arena. It has had to fund reconstruction by tapping foreign exchange reserves and boosting borrowing. Reducing the government budget deficit is a major goal of the current government. The gap between rich and poor has widened in the 1990s, resulting in grassroots dissatisfaction over the skewed distribution of the reconstruction's benefits and leading the government to shift its focus from rebuilding infrastructure to improving living conditions.
Macro-economic trend
This is a chart of trend of gross domestic product of Lebanon at market prices estimated by the International Monetary Fund with figures in millions of Lebanese Pounds.[6]
| Year | Gross Domestic Product | US Dollar Exchange | Inflation Index (2000=100) |
|---|---|---|---|
| 1980 | 14,000 | 3.43 Lebanese Pounds | 0.071 |
| 1985 | 59,329 | 16.41 Lebanese Pounds | 0.21 |
| 1990 | 1,973,000 | 695.20 Lebanese Pounds | 18 |
| 1995 | 18,027,607,000 | 1,621.33 Lebanese Pounds | 81 |
| 2000 | 25,143,000,000 | 1,507.46 Lebanese Pounds | 100 |
| 2005 | 33,243,000,000 | 1,507.48 Lebanese Pounds | 105 |
| 2007 | 37,243,000,000 | 1,507.48 Lebanese Pounds | 103 |
| 2009 | 39,243,000,000 | 1,507.48 Lebanese Pounds | 101 |
| 2011 | 43,243,000,000 | 1,507.48 Lebanese Pounds | 99 |
For purchasing power parity comparisons, the US Dollar is exchanged at 1,403.29 Lebanese Pounds only. Mean wages were $8.95 per manhour in 2009.
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GDP Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 GDP (USD Billions) 14.7 14.2 15.1 16.5 17.7 19.2 22.3 27.8 31.7 39.1 42.0 45.4 49.5 55.5 GDP growth rate 0.0% 2.6% 3.9% 4.4% 6.3% 1.0% -8.2% 9.9% 9.5% 7.0% 8.8% 5.5% 3.5% 6.0% GDP Per Capita (USD) 6321 6766 7023 7444 7731 8002 8708 9062 9213 10351 11902 13013 15130 16346 Source: IMF [7]
Opportunity Cost of Conflict
A report by Strategic Foresight Group has calculated the opportunity cost of conflict for the Middle East from 1991-2010 at a whopping $12 trillion. Had there been peace in the region, Lebanon’s share during this period would be almost a $100 billion (according to 2006 prices). In other words, had there been peace and cooperation since 1991, every Lebanese citizen would be earning over $11,000 instead of the $5,600 in 2010.[8]
External trade
Lebanese exports in 2006Lebanon has a competitive and free market regime and a strong laissez-faire commercial tradition. The Lebanese economy is service-oriented; main growth sectors include banking and tourism. There are no restrictions on foreign exchange or capital movement, and bank secrecy is strictly enforced. Lebanon has recently adopted a law to combat money laundering. There are practically no restrictions on foreign investment. There are no country-specific U.S. trade sanctions against Lebanon.
Remittances
Lebanon benefits from its large, cohesive, and entrepreneurial diaspora.[9] Over the course of time, emigration has yielded Lebanese "commercial networks" throughout the world.[10] As a result, remittances from Lebanese abroad to family members within the country total $8.2 billion[11] and account for one fifth of the country's economy.[12] Nassib Ghobril, the head of research and analysis for Byblos Bank, calculates that Lebanese abroad supply Lebanon with about $1,400 per capita every year.[13]
Investment
The stock market capitalisation of listed companies in Lebanon was valued at $10.858 billion in 2007 by the World Bank.[14]
Lebanon was unable to attract significant foreign aid to help it rebuild from both the long civil war (1975–89) and the Israeli occupation of the south (1978–2000). In addition, the delicate social balance and the near- dissolution of central government institutions during the civil war handicapped the state as it sought to capture revenues to fund the recovery effort. Thus it accumulated significant debt, which by 2001 had reached $28 billion, or nearly 150% of GDP. Unfortunately, economic performance was sluggish in 2000 and 2001 (zero growth in 2000, and estimates between 1.0-1.4% in 2001, largely attributed to slight increases in tourism, banking, industry, and construction). Unemployment is estimated at 14% for 2000 and 29% among the 15-24 year age group, with preliminary estimates of further increases in 2001. However, fortunately, many Lebanese expatriates have been able to return to the country due to the negative financial situations they are facing abroad, due to the global economic crisis. Also, more job opportunities are attracting more Lebanese youths for a chance to return and work in Lebanon, and also a benefit for the Lebanese living in the country, graduating from universities.
Reforms
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Lebanon's current program of reforms focuses on three main pillars:
- Economic revival and sustainable growth, with the private sector as the engine of growth;
- Fiscal consolidation and structural improvement in public sector finances; and
- Monetary, financial, and price stability.
The government also has maintained a firm commitment to the Lebanese pound, which has been pegged to the dollar since September 1999. In late 2000, the government substantially reduced customs duties, adopted export promotion schemes for agriculture, decreased social security fees and restrictions on investment in real estate by foreigners, and adopted an open-skies policy,with positive effects on trade in 1991. Nonetheless, the relative appreciation of the Lebanese currency has undermined competitiveness, with merchandise exports falling from 23% of GDP in 1989 to 4% in 2000.
In 2001, the government turned its focus to fiscal measures, increasing gasoline taxes, reducing expenditures, and approving a value-added-tax that became effective in February 2002. Slow money growth and dollarization of deposits have hampered the ability of commercial banks to finance the government, leaving more of the burden to the central bank. This monetization of the fiscal deficit has put enormous pressure on central bank reserves, mitigated only slightly with the issuance of new Eurobonds over the past 2 years. The central bank has maintained a stable currency by intervening directly in the market, as well as low inflation, and succeeded in maintaining investors' confidence in debt. It has done so at a cost, however, as international reserves declined by $2.4 billion in 2000 and by $1.6 billion in the first half of 2001.
For 2002, the government has put primary emphasis on privatization, initially in the telecom sector and electricity, with continued planning for sales of the state airline, Beirut port, and water utilities. The government has pledged to apply the proceeds of sales to reducing the public debt and the budget deficit. In addition, it projects that privatization will bring new savings as government payrolls are pared, interest rates decline, and private sector growth and foreign investment are stimulated. The government also is tackling the daunting task of administrative reform, aiming to bring in qualified technocrats to address ambitious economic programs, and reviewing further savings that can be realized through reforms of the income tax system. The Lebanese Government faces major challenges in order to meet the requirements of a fiscal adjustment program focusing on tax reforms and modernization, expenditure rationalization, privatization, and improved debt management.
The U.S. enjoys a strong exporter position with Lebanon, generally ranking as Lebanon's fourth-largest source of imported goods. More than 160 offices representing U.S. businesses currently operate in Lebanon. Since the lifting of the passport restriction in 1997 (see below), a number of large U.S. companies have opened branches or regional offices, including Microsoft, American Airlines, Coca-Cola, FedEx, UPS, General Electric, Parsons Brinckerhoff, Cisco Systems, Eli Lilly, Computer Associates and Pepsi Cola. Mexico has also many enterprises run by ethnic Lebanese, such as Carlos Slim's Telmex.
Solidere shares are the most actively traded in the Beirut Stock Exchange. Its share price in the Beirut Stock Exchange has risen sharply in the last year from around US$5.00 in early 2004 to close at US$ 17.50 on Friday, 23 December 2005.
Economic growth
Marina Towers, BeirutGiven the frequent security turmoil it has faced, the Lebanese banking system has adopted a conservative approach, with strict regulations imposed by the central bank to protect the economy from political instability. These regulations have generally left Lebanese banks unscathed by the Financial crisis of 2007–2010. Lebanese banks remain, under the current circumstances, high on liquidity and reputed for their security.[15] In late 2008, Moody's shifted Lebanon's sovereign rankings from stable to positive, acknowledging its financial security.[16] Moreover, with an increase of 51% in the Beirut stock market, the index provider MSCI ranked Lebanon the world's best performer in 2008.[17] Lebanon is one of the only seven countries in the world in which the value of the stock market increased in 2008.[17] The Lebanese economy experienced continued resilience, growing 8.5 percent in 2008 and seven percent in 2009. According to a report by the World Bank, GDP growth in 2010 should remain steady at seven percent.[18] The report cited multiple factors for Lebanon's recent and predicted growth: less-than-expected declines in exports, steady remittances, increased foreign investment, strong domestic demand, booming tourism, and a thriving financial sector. Since Lebanon enjoyed solid economic performance despite a global recession, The World Bank expects continued growth as the global economy improves in 2010. The World Bank projected economic growth in Lebanon at 3.8% in 2012, compared to growth of 2.5% for the global economy, 5.4% in developing countries, 3.2% in the Middle East & North Africa, 2.5% for the MENA region's oil-importing countries, and 3.4% for countries in the region with poor resources and abundant labor.
Lebanon's projected growth rate for 2012 would make it the third fastest growing economy in the MENA region behind Iraq with growth of 12.6% and Morocco with 4%.
Further, the World Bank forecast Lebanon's current account deficit at 17.2% of GDP in 2012 relative to 20.6% of GDP last year, highest in the region, and compared to a surplus of 2.2% of GDP for the region this year. The Bank said Arab oil importers with links to the European Union will feel the impact of slower European and global growth, mainly through trade in goods remittances. It added that oil importers with GCC links such as Lebanon and Jordan will be more shielded, but will still feel indirect effects from lower activity in the GCC.
In parallel, the World Bank estimated economic growth in Lebanon at 3% in 2011, down from 7% in 2010 and compared to growth of 2.4% in the Middle East & North Africa and 1.8% for countries in the region with poor resources and abundant labor.
Lebanon was the third fastest growing economy in the MENA region in 2011, tying with Algeria and coming behind Iraq with 9.6% and Morocco with 4.3%.
It also estimated Lebanon's fiscal deficit at 5.5% of GDP in 2011, relative to a deficit of 7.3% of GDP for net oil importers in the region. It said that Lebanon's current account deficit stood at 20.6% of GDP in 2011, up from 19.7% of GDP in 2010 and compared to a surplus of 3.7% of GDP for the region.
Also, the World Bank estimated Lebanon's foreign currency reserves at 18.6 months of imports in 2011 compared to 8.4 months of imports for the region's net oil importers, constituting the third highest level in the region behind Algeria with 38 months of imports and Saudi Arabia with 27.3 months of imports.
Salaries of Lebanon
On the 15th of October 2011, and after various unions, including the teachers unions, the general workers union and others threatened to strike The minimal wage was increased by 40% (200,000 L.P- 133$) to 700,000L.P (466$) most unions went ahead with the strike except the general workers union .
- Wages between minimal wage and 1,200,000L.P (800) were increased by 200,000 (133$) to become 700,000L.P (minimal wage) and 1,400,000 (933$) respectively .
- Wages more than 1,200,000 L.P up to 1,700,000L.P (1133$) were increased by 300,000L.P ( 200$) to become 1,500,000L.P (1000$) and 2,000,000L.P (1333$).
- Wages above 1,800,000L.P (1200$) were not increased.
The increase in wages was welcomed by most Lebanese but it also sparked criticism by many some workers unions, saying that the increases weren't up to expectations especially that employees earning more that 1200$ were not entitled to raises. Others criticized the raises all together citing that it would burden small business that might end up closing altogether, those critics were mainly opposition politicians.
As of 2011 World Bank Analysis of Quality Life Index it was estimated that :
- -8% of the Lebanese People lives below Poverty line (2,500$)
- - 54% of the Lebanese People lives in the moderate middle class (9,000$) annually. 12% from 1998
- - 22% of the Lebanese People lives in the upper middle class (15,000 $ - 27,000$) annually. 19% from 1998
- - 4% of the Lebanese People lives in the highest Upper Class rich (30,000$ and above) annually 1% from 1998
See also
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| Economics portal |
References
- ^ "Lebanon". International Monetary Fund. http://www.imf.org/external/pubs/ft/weo/2011/01/weodata/weorept.aspx?sy=2008&ey=2011&scsm=1&ssd=1&sort=country&ds=.&br=1&c=446&s=NGDPD%2CNGDPDPC%2CPPPGDP%2CPPPPC%2CLP&grp=0&a=&pr.x=36&pr.y=7. Retrieved 30 April 2011.
- ^ "Doing Business in Lebanon 2012". World Bank. http://www.doingbusiness.org/data/exploreeconomies/lebanon/. Retrieved 2011-11-21.
- ^ "Sovereigns rating list". Standard & Poor's. http://www.standardandpoors.com/ratings/sovereigns/ratings-list/en/eu/?subSectorCode=39. Retrieved 26 May 2011.
- ^ a b c Rogers, Simon; Sedghi, Ami (15 April 2011). "How Fitch, Moody's and S&P rate each country's credit rating". The Guardian. http://www.guardian.co.uk/news/datablog/2010/apr/30/credit-ratings-country-fitch-moodys-standard. Retrieved 31 May 2011.
- ^ "Economics, Business, and the Environment — GDP: GDP per capita, current US dollars". EarthTrends. http://earthtrends.wri.org/text/economics-business/variable-638.html. Retrieved 2008-12-31.
- ^ "Lebanon Monetary Report". International Monetary Fund. http://www.imf.org/external/pubs/ft/weo/2006/01/data/dbcoutm.cfm?SD=1980&ED=2007&R1=1&R2=1&CS=3&SS=2&OS=C&DD=0&OUT=1&C=446&S=NGDP_RPCH-NGDP_R-NGDP-NGDPD-NGDP_D-NGDPRPC-NGDPPC-NGDPDPC-PPPWGT-PPPSH-PPPEX-PPPPC-PCPIPCH-PCPI-BCA_NGDPD-BCA&CMP=0&x=56&y=14. Retrieved 2008-12-31.
- ^ [1] IMF
- ^ [2] Excerpts from the Cost of Conflict Report by Strategic Foresight, January 2009 Group]
- ^ Global Investment House.Lebanon Economic and Strategic Outlook (Nov 2008) Retrieved 28 June 2009.
- ^ Background Note: Lebanon "www.washingtoninstitute.org". Retrieved 3 December 2006.
- ^ International Organization for Migration."Lebanon - Facts and Figures" Retrieved 13 June 2009.
- ^ Reuters."FACTBOX: Facts on Lebanon's economy" Retrieved 13 June 2009.
- ^ http://www.nytimes.com/2007/12/24/world/middleeast/24lebanon.html Retrieved June 18, 2009
- ^ "World Development Indicators - Lebanon". The World Bank. http://web.worldbank.org/WBSITE/EXTERNAL/DATASTATISTICS/0,,contentMDK:20394793~menuPK:1192714~pagePK:64133150~piPK:64133175~theSitePK:239419,00.html. Retrieved 2008-12-31.
- ^ "Lebanon 'immune' to financial crisis". BBC News. 5 December 2008. http://news.bbc.co.uk/2/hi/middle_east/7764657.stm. Retrieved 2010-01-28.
- ^ "Moody's changes outlook for Lebanon's sovereign ratings to positive from stable". Moody's. 11 December 2008. http://google.com/search?q=cache:uxqjwWHMQjIJ:www.finance.gov.lb/NR/rdonlyres/E596B40E-228F-4D78-A797-94A7509D5819/0/LebanonPR.PDF+Lebanon%27s+ratings+upgraded&hl=en&ct=clnk&cd=10&client=firefox-a.
- ^ a b Cooper, Kathryn (October 5, 2008). "Where on earth can you make a decent return?". London: The Sunday Times. http://www.timesonline.co.uk/tol/money/investment/article4881201.ece. Retrieved 2010-01-28.
- ^ Derhally, Massoud (2010-01-21). "Foreign Funds to Spur Growth in Lebanon, Salameh Says". Bloomberg. http://www.bloomberg.com/apps/news?pid=20601104&sid=a3.ULyFK18Pk. Retrieved 1 February 2010.
External links
- BSE trade sky high despite tensions - The Daily Star
- Embassy of Lebanon, Washington D.C. - Country Profile, The Economy
- Lebanon Economic Development at the Open Directory Project
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