Country Report Lebanon July 2009

Outlook for 2009-10

• A new government is still being formed following the victory of the anti-Syrian, pro-Western "March 14th" coalition and its allies in the June election.
• It appears likely that the opposition will be included in the government, but will lose their power to veto cabinet decisions. As a compromise, ministers nominated by the president may be given the casting vote.
• Policymaking will remain constrained by the fragility of the existing alliances and the latent fear of renewed disputes.
• Major issues of contention include the position of each sect in the political system, relations with Syria and the role of Hizbullah's armed forces.
• A regional trend towards rapprochement and engagement is helping to keep Lebanon relatively peaceful, but renewed tensions in the region, or between the US and Israel and Iran, could contribute to a re-escalation in Lebanon.
• There is a need for fiscal reform to reduce the large public debt stock, as the costs of debt-servicing weigh heavily on the budget, but it will be slow at best.
• The budget deficit is forecast to widen in 2009, to more than 11% of GDP, as tax revenue growth slows and spending on wages and subsidies rises.
• Real GDP growth is forecast to fall to 2.4% in 2009, rising to 3.3% in 2010, as a modest pick-up in regional growth boosts investment and tourist arrivals.

Monthly review

• The president has asked Saad al-Hariri, the 39-year-old son of the assassinated former prime minister, Rafiq al-Hariri, to form the next government.
• The formation of the government has been slowed by a dispute about the division of seats in the cabinet and the opposition's request for a veto.
• Senior officials from Saudi Arabia, the main foreign backer of March 14th, have visited Syria, which backs "March 8th", and there has been speculation about a possible Saudi-Syrian summit to discuss Lebanon and other issues.
• Ahead of the formation of the government, Walid Jumblatt, one of the most powerful figures in March 14th, has voiced his opposition to privatisation.
• The arrival of summer and spike in tourism has increased pressure on the creaking electricity infrastructure, with power cuts reaching nine hours in Beirut and 12 hours in rural areas by the end of June.
• Lebanon's leading banks have reported profit growth for the first quarter of 2009 despite the global credit crunch and associated regional slowdown.
• Riad Salameh, the central bank governor, has forecast real GDP growth at 6% for 2009.

Source: Country Report

This report covers the following industry codes:
SIC Code: 37;60;48;49;2834;80;47;1;15;10;70
NAICS Code: 336;52;517;22;3254;62;48;11;23;212;72