Jordan, Lebanon and Syria Business Forecast Report Q3 2008

Publication Date	June 2008
Publisher	Business Monitor
Product Type	Report
Pages	55
ISBN Number	1745-0616
Product Code	BMI01610

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Summary

Peace Deals, GCC Wealth And Inflation Another quarter, another host of significant political and economic developments in the turbulent East Mediterranean region. Key themes this quarter include GCC wealth - Jordan, Lebanon and Syria are all benefiting from inward investment from the region - and fuel and food price driven inflation. Only Lebanon has not yet lifted fuel subsidies, posing a substantial threat to its budget and debt profile, but political risks will continue to constrain its ability to do so. The possibility of a peace deal between Israel and Syria is perhaps the most interesting political development this quarter though: such a deal could seriously undermine Hizbullah, which would be good news for the governments of Lebanon and Jordan.

While slowing consumption growth will lead to a slowdown in Jordan's economic expansion over the coming years, we expect real GDP growth to stay above .0% throughout the forecast period.

This will be largely due to inward investment, mainly from the GCC, and the government's attempts to emulate Saudi Arabia's plan for economic cities. While we welcome the government's ongoing drive to reform the economy, the recent move to phase out fuel subsidies will put further pressure on inflation and also presents an upside risk to political unrest. Indeed, in light of the decision we have raised our short-term political risk rating. That said, we expect domestic stability to remain broadly in place and the government to continue its efforts to improve Jordan's business environment, in particular by rooting out corruption and continuing with privatisation.

The political accord signed in Qatar on May 1 between Lebanon's warring political factions has certainly improved the outlook, in a sharp turnaround from the worrying developments earlier that month. We are cautiously optimistic, albeit maintaining that the new deal does not address the fundamental question of Hizbullah's role within the Lebanese state and, more broadly, the economic and political under-representation of the Shi'a. The lifting of the opposition protests bodes well economically, but much will depend on the government's ability to move forward with the reform process.

We expect Syria's economy to slow down over the coming years, on the back of the widening trade deficit. This will be largely driven by falling oil exports - as production looks set to continue its decline - and strong import growth. On the upside, the gas sector and other non-oil industries will continue to benefit from inward investment which will cushion the economy from a hard landing.

On the political front the government has followed Jordan's lead and cut fuel subsidies, although given its strong grip on power we see widespread political unrest as an unlikely scenario. In terms of foreign policy, we expect Syria to retain its anti-US stance and strong relations with Iran and China. With talks being resumed with Israel and the government potentially looking to secure a return of the Golan Heights, we see peace with Israel as a possibility going forward.

Content

Bmi Risk Ratings
Middle East - Ratings League Executive Summary
Peace Deals, Gcc Wealth and Inflation
Jordan
Chapter 1.1: Political Outlook
- SWOT Analysis
- Domestic Politics
- Worrying Ratings Trends but Overall Stability to Remain
- Inflation and Fuel Price Hikes Have Cause Short-Term Political Risk to Rise, Benefiting The Islamist Opposition,
- but The Government Will Maintain Control, and Continue along Its Reformist Path
List of Tables
- Table: Jordan Political Overview
Chapter 1.2: Economic Outlook
- SWOT Analysis
- Economic Activity
- Strong Fdi to Ensure Growth Holds up
- Although Real Gdp Growth Will Continue to Slow down over The Coming Years - on The Back of Slower Expansion
- in Private and Public Consumption - We Expect Strong Gross Fixed Capital Formation and The Expansion of
- Economic Cities to Ensure Growth Stays above 4.0% throughout The Forecast Period
List of Tables
- Table: Jordan - Economic Activity
- Monetary Policy
- Inflation Forecasts up as Fuel Subsidies Go
- We Have Revised up Our End-Year Inflation Forecasts for Jordan to 9.0% Y-O-Y and 6.0% Y-O-Y for 2008 and 2009
- Respectively, following The Release of Higher than Expected Official Figures for Q107 and Ongoing Price Pressures
List of Tables
- Table: Jordan - Monetary Policy
- Lebanon
Chapter 2.1: Political Outlook
- SWOT Analysis
- Domestic Politics
- Reform Outlook Still Bleak despite Deal
- The Outlook Is Certainly Brighter than IT Was in Our Last Business Forecast Report, but We Remain Cautious
List of Tables
- Table: Lebanon Political Overview
Chapter 2.2: Economic Outlook
- SWOT Analysis
- Economic Activity
- Politics Poses Downside Risk to Growth Forecasts
- Our Economic Risk Ratings Have Risen Slightly on The Back of News That The Economy Managed to Grow by 4.0%
- Last Year
List of Tables
- Table: Lebanon - Economic Activity
- Table: Lebanon - Fiscal Policy
- Syria
Chapter 3.1: Political Outlook
- SWOT Analysis
- Foreign Policy
- Fragile Balance to Continue, but Israel Deal Possible
- Events in Lebanon Will Keep The Syrian Government under External Pressure, but Its Ongoing Defiance towards
- The US Will Bolster Its Reputation Domestically
List of Tables
- Table: Syria Political Overview
Chapter 3.2: Economic Outlook
- SWOT Analysis
- Economic Activity
- Growth to Slow as Oil Production Continues Decline
- While We Expect Real Gdp Growth to Slow over The Coming Years, Given The Ongoing Decline in Oil Production and
- Strong Import Growth, Overall Expansion Will Hold up above 2.5% on The Back of Increases in Gas Sector Output
- and A Good Performance from Alternative Industries Such as Tourism
List of Tables
- Table: Syria - Economic Activity
- Table: Syria - Monetary Policy
Chapter 4: Special Report
- Business Outlook for Global Frontier Markets
- Growing Fast on The New Frontier
- The 41 States That Bmi Examines in A New Report on Our Online Service May Make up Only A Small Slice of The
- World Economy, but They Possess Characteristics That Will See Them Gain Importance in The Eyes of Investors
- and Global Businesses over The Coming Years
List of Tables
- Table: Frontier Markets - Key Data and Projections for Top 10 Countries
- Frontier Investment
- Potential and Pitfalls
- The Spectacular Macroeconomic Performance of Frontier Markets in Recent Years Has Been Matched by Mildly
- Successful Efforts to Deepen Capital Markets
List of Tables
- Table: Gdp per Capita, US$ (in Order of % Increase)
- Table: Diversity through Frontier Markets - Correlation Coefficients January 2004-April 2008
- Table: Frontier Market Indices
- Regional Overview
- Laos
- Neighbouring Economies The Key to Growth
- Laos's Gdp Growth Has Been Boosted in Recent Years as Neighbours China, Thailand and Vietnam Compete for
- Its Natural Resources
- Yemen
- Huge Potential, but Don't Bank on Gcc Membership
- Markets Do Not Come Much More Frontier than Yemen, and, as Would Be Expected, There Is Huge Potential for
- Development, with The Prospect of Eventual Gcc Membership Likely to Act A Key Investment Pull
List of Tables
- Table: Yemen Economic Activity
- Democratic Republic of The Congo
- Mining Industry to Drive Growth
- The Democratic Republic of The Congo's Mining Industry Will Be A Key Driver of Growth and Is Likely to Attract
- Significant Levels of Fdi, with Our Real Gdp Forecasts Standing at 8.3% and 7.9% in 2008 and 2009, Respectively
List of Tables
- Table: Democratic Republic of The Congo - Economic Activity
- Cuba
- Investment Prospects after Fidel
- The Accession of A New Leadership Structure in Cuba Has Sparked Excitement That The 45-Year-Old Trade Embargo
- with The US May Be Lifted and Cuba May Move toward Market Liberalisation
List of Tables
- Table: Cuba Macroeconomic Data and Forecasts
- Mongolia
- Minerals to Drive Economic Boom
- Mongolia Is in The Midst of A Massive Resource-LED Economic Boom That Should Lift Gdp Growth into The Double
- Digits and Underpin Robust Increases in Exports and Inflows of Foreign Investment Capital over The Long Term
List of Tables
- Table: Mongolia - Economic Activity