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Lebanon: Waiting for the sun

15 March 2017


Lebanon has remained in decent financial shape, despite political uncertainty and being cut off from major Gulf markets, and could experience a revival once Syria eventually starts to recover, says James Gavin

Lebanon has remained in decent financial shape, despite political uncertainty and being cut off from major Gulf markets, and could experience a revival once Syria eventually starts to recover, says James Gavin

After two and a half years of political drift as the country failed to elect a president to succeed Michel Suleiman, who left office in May 2014, Lebanon is now showing signs of renewed economic vigour with a new head of state installed, a unity cabinet formed and promising indicators of improving investor sentiment.

The political compromise that saw the veteran former general Michel Aoun named president on 31 October 2016 has done much to reinject a sense of dynamism into a flagging economy. Real estate demand – one significant barometer of economic confidence in Lebanon – spiked in the fourth quarter of 2016. Byblos Bank’s Real Estate Demand Index showed a 17.5% increase in that period over the previous quarter.

 "Toward the end of 2016, Lebanon witnessed a positive political development domestically that brought back a sense of confidence in the country’s ability to boost its economic status. Lebanon elected a new president and succeeded in forming a new cabinet chaired by Prime Minister Saad Al-Hariri," says Mohamed Ali Beyhum, executive general manager at Lebanon’s Bankmed and chairman and general manager of MedSecurities Investment Company.

The country’s growth outlook has improved markedly in the matter of a few months. The Washington-based Institute of International Finance projects Lebanon’s real GDP growth rate to accelerate from an estimated 1.4% in 2016 to 3% in 2017, viewing the politically developments leading to a modest recovery in private investment and in exports of goods and services.

Michel Chikhani, managing director at BLOM Asset Management Co, cautions that it is too early to expect tangible signs of improved investor sentiment in the form of significant capital inflows. "But people are more aware now that there might be a possibility of an improvement," he says.

 Marwan Barakat, head of research at Lebanon’s Bank Audi, is nonetheless confident that the political atmosphere will yield positive results. "On the basis of the domestic political settlement that led to successful presidential elections with regional international support, our macro forecast for 2017 rests on an improving growth scenario. We project growth at 4% in 2017, more than twice the average we had over past six years," he says.

Barakat foresees private investment growing by 15% in the next year, albeit from a low base in 2016. "For the past few years the Lebanese have been delaying investment decisions. Now, with the improvement in the political outlook, we at Audi are seeing more investment initiatives in the country," he says.

Reform agenda

There may be longer-lasting gains to be made. According to Bankmed’s Beyhum, the long awaited political breakthrough is anticipated to pave the way for the much needed structural reforms and adjustments that would place the country on the right growth track for the coming years.

"The resumption of the domestic political process and the prospect of a government that is able to tackle Lebanon’s reform agenda and set a budget to improve the country’s infrastructure – particularly power, telecom, and transport – would have a material impact on confidence and growth. Hereby, the positive sentiment would boost inflows, support financial stability and promote investment," says Beyhum.


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