Country Report Lebanon February 2009

Outlook for 2009-10

• The national unity government is expected to survive until the June 2009 election, and the confessional allocation of parliamentary seats under the constitution will limit the extent of changes to the composition of parliament.
• Political risks will remain elevated. Increasingly bitter disputes and shifts in political alliances are likely in the run-up to and aftermath of the June 2009 general election, and the result could be disputed.
• The combination of political divisions and the global economic downturn is likely to limit progress with economic reform and privatisation plans.
• The fiscal deficit is projected to remain at just over 10% of GDP in 2009, before narrowing slightly, to 9.9% of GDP, in 2010.
• Global GDP growth is set to fall sharply in 2009, with only a patchy recovery in 2010. Middle Eastern growth will be pulled down as oil prices weaken.
• Lebanon's real GDP growth is forecast to slow to 2.4% in 2009, as world trade and investment suffer, picking up marginally to 3.3% in 2010.
• The current-account deficit is forecast to narrow to 7.6% of GDP in 2009, as import prices fall, before widening to 10.9% of GDP in 2010.

Monthly review

• A row has erupted over the role of the security services, after an unnamed security source accused the telecoms minister of refusing to hand over intercepts to agencies investigating bomb attacks against the army.
• Michel Murr, a veteran Christian politician, has announced that he is to stand as the head of a centrist list, which appears to be competing with Michel Aoun's Free Patriotic Movement.
• The budget deficit widened to L£4.41trn (US$2.9bn), or 10.4% of estimated GDP, in 2008, from L£3.84trn (10.3% of GDP) in 2007.
• The government has mandated three banks to roll over its US$2.7bn of maturing Eurobonds this year: two local banks, Byblos Bank and Credit Libanais, and Switzerland's Credit Suisse.
• Politicians have been arguing over demands from the Amal party for extra spending for reconstruction in southern Lebanon in the 2009 budget.
• The cabinet has agreed to reduce the tariffs charged for mobile-phone calls by Lebanon's two state-owned but privately managed mobile-phone providers.
• Tourist arrivals reached a record 1.33m in 2008, a 31% increase on 2007.
• Inflation eased in the final quarter of last year, falling to 5.5% year on year in December.

This report covers the following industry codes:
SIC Code: 49;70
NAICS Code: 22;72