Country Report Lebanon November 2008

Outlook for 2009-10

• The national unity government is expected to survive until the May 2009 parliamentary election, but it will stay divided, as agreement between the various parties and sects on many important policy issues remains elusive.
• Increasingly bitter disputes and shifts in political alliances are likely in the run-up to and aftermath of the election, raising political risks in 2009-10.
• 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 7.8% of GDP in 2009 before widening again to 8.7% of GDP the following year.
• Global GDP growth is set to fall sharply to 2% in 2009, recovering only gradually to 3% in 2010. This will bring down the average price of the benchmark dated Brent Blend to US$67/barrel over the outlook period.
• Lebanon's real GDP growth is forecast to contract slightly to 3.1% in 2009, as world trade and investment suffer, picking up marginally to 4.1% in 2010.
• The Economist Intelligence Unit expects average consumer price inflation to decline gradually over the outlook period, to 5.8% in 2009 and 3.5% in 2010.
• We forecast that the current-account deficit should narrow to around 1% of GDP in 2009, as import prices fall, before widening to 4.6% of GDP in 2010.

Monthly review

• Lebanon and Syria have established diplomatic ties for the first time, implying formal Syrian recognition of Lebanon's independence.
• The leaders of Hizbullah and the Future Movement have held a long-awaited meeting, as various factions engage in talks in the run-up to the election.
• Syrian state television has broadcast the confessions of ten alleged militants who claim to have been supported by anti-Syrian politicians in Lebanon.
• The government has acknowledged that its plans for privatisation, including of the two mobile networks, will be held back by global economic factors.
• With global credit markets virtually closed, the government is in discussions with local banks about rolling over the sovereign Eurobonds and Treasury bills that are due to mature in 2009.
• Following the May political settlement, tourist arrivals have recovered to 983,585 for the January-September period, a year-on-year increase of 28.2%.
• Net inflows of capital, transfers and invisibles surged to US$2.9bn in July, more than twice the average monthly level in the first six months.

Source: Country Report

This report covers the following industry codes:
SIC Code: 60;70
NAICS Code: 52;72