FROM SCRATCH NEWSWIRE

SCAVENGING THE INTERNET

LEBANESE ECONOMY EVADES EFFECTS OF GLOBAL CRISIS – REPORT

Posted by Gilmour Poincaree on December 8, 2008

Monday, December 08, 2008

Lebanon This Week, with The Daily Star

PUBLISHED BY ‘THE DAILY STAR’ (Lebanon)

BEIRUT: In its first report on Lebanon’s economy since the global financial crisis, the Institute of International Finance (IIF) indicated that there were no noticeable direct effects of the global financial turmoil on Lebanon and sovereign spreads have increased less than in other emerging markets in October and November 2008, according to Byblos Bank’s Lebanon This Week.

The report said that Lebanese banks have few direct links to foreign counterparts affected by the current financial market turmoil, and that the sector’s regulatory framework has limited banks’ exposure to structured products that have been at the core of the global crisis.

It added that the banking system remains well-capitalized and highly liquid.

The IIF added that macroeconomic developments have improved significantly since the Doha accord last May, but warned that the main risk to the outlook comes from a potential deterioration in the political and security situation in the run up to the May 2009 parliamentary elections.

It projected economic growth at 5.5 percent in 2008 and at 3.5 percent in 2009, adding that the spillover from the global economic slowdown could adversely affect tourism and construction activity.

It also noted that consumer price inflation peaked in July 2008 at 14 percent year-on-year, reflecting the sharp rise in commodity prices, and then declined to 10 percent in September. It expected inflation to average 12 percent in 2008.

The IIF considered that fiscal performance improved in 2008 and estimated the primary surplus to slightly exceed 2 percent of GDP this year.

But it cautioned that the overall fiscal deficit, while narrowing, remains very large due to the continued large interest payments on the public debt, and projected a deficit of 9.8 percent of GDP in 2008. The report forecast a fiscal deficit of 9 percent of GDP for 2009.

The IIF said Lebanon’s large public debt remains the country’s core macroeconomic challenge. It added that the government faces sizeable gross financing needs of $5.5 billion in 2009.

The report also predicted public debt to decline to 165 percent of GDP by the end of 2008.

CLICK HERE FOR THE ORIGINAL ARTICLE

PUBLISHED BY ‘THE DAILY STAR’ (Lebanon)

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