Country Report Lebanon January 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 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 narrow slightly to 8.2% of GDP in 2009, before widening again to 8.5% of GDP the following year.
• 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 around 4.7% of GDP in 2009, as import prices fall, before widening to 7.8% of GDP in 2010.

Monthly review

• Several rockets have been fired from Lebanon into southern Israel in an apparent response to Israel's offensive in Gaza, but Hizbullah has denied responsibility, and Israel has appeared to accept this.
• Russia has said that it will supply the Lebanese air force with ten MiG-29 aircraft as a "gift", as part of a deal that will include Russian training for Lebanese forces.
• The government has issued a draft budget for 2009, relatively early in comparison to recent years. It envisages a deficit of 9.4% of GDP, narrower than in 2008, as falling oil prices should reduce electricity subsidy costs.
• Parliament has passed legislation that will increase most public-sector salaries by around US$132 a month. The government has also agreed to honour a retrospective pay claim that should have been paid in 1998.
• New GDP figures have been released, putting growth at 0% in 2006 (owing to the war with Israel) and 4% in 2007.
• The finance minister has cut the government's 2009 GDP growth forecast from 5% to 3% and has projected that average annual inflation will be 5%.
• Middle East Airlines, Lebanon's national flag carrier, has reported that its passenger numbers were up by 20% year on year in 2008.

Source: Country Report

This report covers the following industry codes:
SIC Code: 15;65;60
NAICS Code: 23;53;52