Economy of Lebanon

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Economy of Lebanon
Beirut Downtown Seafront C.jpg
CurrencyLebanese pound (LBP)
Calendar
Trade organisations
CAEU
Statistics
GDPIncrease $54.1 billion (2018 est.)[1]
Increase $88.2 billion (PPP) (2017 est.)[1]
GDP growth
0.8% (2015), 2.0% (2016),
2.0% (2017e), 3.0% (2018f) [2]
GDP per capita
Increase $23,400 (PPP) (2018 est.)[1]
$15,000 (nominal) (2015 est.)[3]
GDP by sector
agriculture 3.9%, industry 13.1%, services 80% (2017 est.)[1]
Negative increase 5% (2017 est.)[1]
Labour force
2.166 million note: in addition, there are as many as 1 million foreign workers (2016 est.)[1]
Unemployment10% (2017 est.)
Main industries
banking, tourism, winery, food processing, jewelry, cement, textiles, mineral and chemical products, wood and furniture products.
142nd (2019)[4]
External
ExportsIncrease $4.051 billion (2017 est.)[1]
Export goods
authentic jewelry, inorganic chemicals, miscellaneous consumer goods, fruit, tobacco, construction minerals, electric power machinery and switchgear, textile fibers and paper.
Main export partners
 China 13%
 United Arab Emirates 9.9%
 South Africa 7.5%
 Saudi Arabia 6.5%
 Syria 6.5% (2017)[1]
ImportsIncrease $18.05 billion (2017 est.)[1]
Import goods
petroleum products, cars, medical products, clothing, meat and live animals, consumer goods, paper, textile fabrics and tobacco.
Main import partners
 China 10.2%
 Italy 8.9%
 Greece 7%
 Germany 6.6%
 United States 6.3% (2017)[1]
$37.08 billion (31 December 2015 est.)[5]
Public finances
US$ 74.5 billion[6][7] (Sep 2018),
140% of GDP (2018)
Revenues$12.133 billion (2014 est.)
Expenses$17.456 billion (2012 est.)
Economic aidrecipient $5.4 billion (2014 est.)
Standard & Poor's:[8]
B-
Outlook: Negative
Moody's:[9]
Caa1
Outlook: Stable
Fitch:[10]
B-
Outlook: Negative
Foreign reserves
Decrease$48.6 billion (December 2015)
Main data source: CIA World Fact Book
All values, unless otherwise stated, are in US dollars.

The economy of Lebanon is generally classified as a developing economy. The nominal GDP was estimated $54.1 billions in 2018 [1], with a per capita GDP amounting to $12,000. Government spending amounted to $15.9 billion in 2018[11], or 23% of GDP.

The Lebanese economy significantly expanded after the war of 2006, with growth averaging 9.1% between 2007 and 2010[12]. After 2011 the local economy was affected by the Syrian civil war, growing by a yearly average of 1.7% on the 2011-2016 period and by 1.5% in 2017[12]. In 2018, the size of the GDP was estimated to be $54.1 billion [1]. Lebanon is the third-highest indebted country in the world in terms of the ratio of debt-to-GDP; as a consequence, interest payments consumed 48% of domestic government revenues in 2016, thus limiting the government’s ability to make needed investments in infrastructure and other public goods.[13]

The Lebanese economy is service-oriented. Lebanon has a strong tradition of laissez-faire, with the country's constitution stating that 'the economic system is free and ensures private initiative and the right to private property'; the major economic sectors include metal products, banking, agriculture, chemicals, and transport equipment. Main growth sectors include banking and tourism. There are no restrictions on foreign exchange or capital movement.

History[edit]

A pedestrian-only street in Beirut's central district.

The 1975-90 Lebanese civil war seriously damaged Lebanon's economic infrastructure, cut national output by half,[16] and had major consequences for Lebanon's position as a Middle Eastern entrepot and banking hub.[17] After the war, the central government regained its ability to collect taxes and control over key port and government facilities; as a result, GDP per capita expanded 353% in the 1990s.[18] Economic recovery has been helped by a financially sound banking system and resilient small- and medium-scale manufacturers, with family remittances, banking services, manufactured and farm exports, and international aid as the main sources of foreign exchange.[19] Lebanon's economy has made impressive gains since the launch of "Horizon 2000," the government's $20 billion reconstruction program in 1993. Real GDP grew 8% in 1994 and 7% in 1995 before Israel's Operation Grapes of Wrath in April 1996 stunted economic activity. Real GDP grew at an average annual rate of less than 3% per year for 1997 and 1998 and only 1% in 1999. During 1992-98, annual inflation fell from more than 100% to 5%, and foreign exchange reserves jumped to more than $6 billion from $1.4 billion. Burgeoning capital inflows have generated foreign payments surpluses, and the Lebanese pound has remained relatively stable. Progress also has been made in rebuilding Lebanon's war-torn physical and financial infrastructure. Solidere, a $2-billion firm, is managing the reconstruction of Beirut's central business district; the stock market reopened in January 1996, and international banks and insurance companies are returning; the government nonetheless faces serious challenges in the economic arena. It has had to fund reconstruction by tapping foreign exchange reserves and boosting borrowing. Reducing the government budget deficit is a major goal of the current government; the gap between rich and poor grew in the 1990s, resulting in popular dissatisfaction over the skewed distribution of the reconstruction's benefits and leading the government to shift its focus from rebuilding infrastructure to improving living conditions.

After the end of the civil war, Lebanon enjoyed considerable stability, Beirut's reconstruction was almost complete,[20] and increasing numbers of tourists poured into the nation's resorts;[21] the economy witnessed growth, with bank assets reaching over 75 billion US dollars,[22] Market capitalization was also at an all-time high, estimated at $10.9 billion at the end of the second quarter of 2006.[22] The month-long 2006 war severely damaged Lebanon's economy, especially the tourism sector.[23] Over the course of 2008 Lebanon rebuilt its infrastructure mainly in the real estate and tourism sectors, resulting in a comparatively robust post war economy. Major contributors to the reconstruction of Lebanon include Saudi Arabia (with US$1.5 billion pledged),[24] the European Union (with about $1 billion)[25] and a few other Persian Gulf countries with contributions of up to $800 million.[26]

Given the frequent security turmoil it has faced, the Lebanese banking system has adopted a conservative approach, with strict regulations imposed by the central bank to protect the economy from political instability; these regulations have generally left Lebanese banks unscathed by the Financial crisis of 2007–2010. Lebanese banks remain, under the current circumstances, high on liquidity and reputed for their security.[27] In late 2008, Moody's shifted Lebanon's sovereign rankings from stable to positive, acknowledging its financial security.[28] Moreover, with an increase of 51% in the Beirut stock market, the index provider MSCI ranked Lebanon the world's best performer in 2008.[29] Lebanon is one of the only seven countries in the world in which the value of the stock market increased in 2008;[29] the Lebanese economy experienced continued resilience, growing 8.5 percent in 2008, 7 percent in 2009 and 8.8% in 2010. However, Lebanon's debt to GDP ratio remained one of the highest in the world.[30]

The International Monetary Fund issued a second report on Lebanon in October 2015, where its expectations of the economic growth rate were lowered to 2%, compared to the 2.5% growth rate of the first report, released in April 2015.[31]

External trade[edit]

Lebanese exports in 2006
External trade (USD, million)[32][33]

Lebanon's trade balance is structurally negative. In 2017, the trade deficit reached $20.3 billion. The country imported $23.1 billion[32] worth of goods and services, and exported $2.8 billion[33].

Lebanon has a competitive and free market regime and a strong laissez-faire commercial tradition; the Lebanese economy is service-oriented; main growth sectors include banking and tourism. There are no restrictions on foreign exchange or capital movement.

Corruption[edit]

According to NGO Transparency International Lebanon ranks 138th out of 180 countries surveyed on the corruption perception index. A poll[34] conducted by Transparency International in 2016 indicated that 92% of Lebanese thought that corruption had increased that year. Moreover 67% of the respondents indicated that they believed that the majority of the political and economical elites were corrupted, and 76% indicated that the government was doing poorly when it came to fighting corruption[34].

Fiscal heaven[edit]

In 2018 Lebanon ranked 11th on the Financial Secrecy Index. Lebanon has a strong history of banking secrecy but has taken steps to fight money laundering and tax evasion in recent years; as of January 2019, banking secrecy applies to Lebanese nationals living in Lebanon but is not applicable to US citizens and US fiscal residents since the FATCA agreement was introduced. Lebanon is part of the Global Forum on Transparency and Exchange of Information for Tax Purposes and has signed an agreement to exchange fiscal data with other countries, but as of January 2019 it is not compliant with certain provisions of the treaty.

Ali Hassan Khalil, Finance Minister, confirmed that 2019’s draft budget showed a deficit of less than 9% of GDP compared to 11.2% in 2018. Khalil also claimed that the economic growth forecast of 1.5 percent could go up to 2% in 2019.[35]

Foreign investment[edit]

There are little restrictions on foreign investment, barring israeli citizens and entities. There are no country-wide U.S. trade sanctions against Lebanon, although Hezbollah and individuals associated with it have been targeted by the American government. Foreign ownership of real estate is legal under certain conditions[36].

According to a report by The Wall Street Journal, “Lebanon has one of the world’s highest public debt-to-gross domestic product ratios, rising to over 150% as it takes on more debt to plug budget holes.” In January 2019, in a move to boost the economy of Lebanon and help the country overcome its debts, Qatar pledged to buy $500 million’s worth of government bonds.[37] In June 2019, Bloomberg reported that Qatar had bought some of the bonds and planned to complete the rest of the investment soon.[38]

Remittances[edit]

Lebanon benefits from its large, cohesive, and entrepreneurial diaspora.[39] Over the course of time, emigration has yielded Lebanese "commercial networks" throughout the world;[40] as a result, remittances from Lebanese abroad to family members within the country total $8.2 billion[41] and account for one fifth of the country's economy.[42] Nassib Ghobril, the head of research and analysis for Byblos Bank, calculates that Lebanese abroad supply Lebanon with about $1,400 per capita every year.[43]

Investment[edit]

The stock market capitalisation of listed companies in Lebanon was valued at $9.6 billion in January 2019, down from $11.5 billion in January 2018[44]

Lebanon was unable to attract significant foreign aid to help it rebuild from both the long civil war (1975–89) and the Israeli occupation of the south (1978–2000). In addition, the delicate social balance and the near- dissolution of central government institutions during the civil war handicapped the state as it sought to capture revenues to fund the recovery effort, thus it accumulated significant debt, which by 2001 had reached $28 billion, or nearly 150% of GDP. Unfortunately, economic performance was sluggish in 2000 and 2001 (zero growth in 2000, and estimates between 1.0-1.4% in 2001, largely attributed to slight increases in tourism, banking, industry, and construction). Unemployment is estimated at 14% for 2000 and 29% among the 15-24 year age group, with preliminary estimates of further increases in 2001. However, fortunately, many Lebanese expatriates have been able to return to the country due to the negative financial situations they are facing abroad, due to the global economic crisis. Also, more job opportunities are attracting more Lebanese youths for a chance to return and work in Lebanon, and also a benefit for the Lebanese living in the country, graduating from universities.

Reforms[edit]

Economy of Lebanon
Coat of arms of Lebanon.svg
Overview
Other topics

Lebanon's current program of reforms focuses on three main pillars:

Lebanon has always been under constant political and social challenges because of its location between the east and the west.
  • Economic revival and sustainable growth, with the private sector as the engine of growth;
  • Fiscal consolidation and structural improvement in public sector finances; and
  • Monetary, financial, and price stability.

The government also has maintained a firm commitment to the Lebanese pound, which has been pegged to the dollar since September 1999. In late 2000, the government substantially reduced customs duties, adopted export promotion schemes for agriculture, decreased social security fees and restrictions on investment in real estate by foreigners, and adopted an open-skies policy, with positive effects on trade in 1991. Nonetheless, the relative appreciation of the Lebanese currency has undermined competitiveness, with merchandise exports falling from 23% of GDP in 1989 to 4% in 2000.

In 2001, the government turned its focus to fiscal measures, Increasing gasoline taxes, reducing expenditures, and approving a value-added-tax that became effective in February 2002. Slow money growth and dollarization of deposits have hampered the ability of commercial banks to finance the government, leaving more of the burden to the central bank; this monetization of the fiscal deficit has put enormous pressure on central bank reserves, mitigated only slightly with the issuance of new Eurobonds over the past 2 years. The central bank has maintained a stable currency by intervening directly in the market, as well as low inflation, and succeeded in maintaining investors' confidence in debt, it has done so at a cost, however, as international reserves declined by $2.4 billion in 2000 and by $1.6 billion in the first half of 2001.

For 2002, the government has put primary emphasis on privatization, initially in the telecom sector and electricity, with continued planning for sales of the state airline, Beirut port, and water utilities; the government has pledged to apply the proceeds of sales to reducing the public debt and the budget deficit. In addition, it projects that privatization will bring new savings as government payrolls are pared, interest rates decline, and private sector growth and foreign investment are stimulated; the government also is tackling the daunting task of administrative reform, aiming to bring in qualified technocrats to address ambitious economic programs, and reviewing further savings that can be realized through reforms of the income tax system. The Lebanese Government faces major challenges in order to meet the requirements of a fiscal adjustment program focusing on tax reforms and modernization, expenditure rationalization, privatization, and improved debt management.

Faraya in North Lebanon. The Lebanese economy depends on its tourism sector throughout all seasons of the year. Tourists from Europe, GCC and Arab countries visit Lebanon for various reasons.

The U.S. enjoys a strong exporter position with Lebanon, generally ranking as Lebanon's fourth-largest source of imported goods. More than 160 offices representing U.S. businesses currently operate in Lebanon. Since the lifting of the passport restriction in 1997 (see below), a number of large U.S. companies have opened branches or regional offices, including Microsoft, American Airlines, Coca-Cola, FedEx, UPS, General Electric, Parsons Brinckerhoff, Cisco Systems, Eli Lilly, Computer Associates and Pepsi Cola. Mexico has also many enterprises run by ethnic Lebanese, such as Carlos Slim's Telmex.

Solidere shares are the most actively traded in the Beirut Stock Exchange, its share price in the Beirut Stock Exchange has risen sharply in the last year from around US$5.00 in early 2004 to close at US$17.50 on Friday, 23 December 2005.

Salaries of Lebanon[edit]

Marina Towers, Beirut

On 15 October 2011, after various unions, including the teachers union, the general workers union, and others threatened to strike, the minimum wage was raised by 40% (200,000 LBP - $133) to 700,000 LBP ($466). Most unions went ahead with the strike except the general workers union.

  • Wages between minimal wage and 1,200,000 LBP ($800) were increased by 200,000 ($133) to become 700,000 LBP (minimal wage) and 1,400,000 LBP ($933) respectively.
  • Wages more than 1,200,000 LBP up to 1,700,000 LBP ($1133) were increased by 300,000L.P ($200) to become 1,500,000 LBP ($1000) and 2,000,000 LBP ($1333).
  • Wages above 1,800,000 LBP ($1200) were not increased.

The increase in wages was welcomed by most Lebanese but it also sparked criticism by many some workers unions, saying that the increases were not up to expectations especially that employees earning more that $1200 were not entitled to raises. Others criticized the raises altogether citing that it would burden small business that might end up closing altogether, those critics were mainly opposition politicians.

As of 2013 World Bank analysis of Quality Life Index, it was estimated that:

  • 15% of the Lebanese people lives below poverty line ($2,500)[45]
  • 54% of the Lebanese people lives in the moderate middle class ($9,000) annually. Increase 12% from 1998
  • 32% of the Lebanese people lives in the upper middle class ($15,000 - $27,000) annually. Decrease 19% from 1998
  • 7% of the Lebanese people lives in the highest upper class rich ($30,000 and above) annually Increase 1% from 1998

Macro-economic trend[edit]

This is a chart of trend of gross domestic product of Lebanon at market prices estimated by the International Monetary Fund with figures in millions of Lebanese pounds. [46]. Figures prior to 1995 are grossly distorted due to hyperinflation.

Year Gross Domestic Product US Dollar Exchange Inflation Index (2000=100)
1980 14,000 3.43 Lebanese Pounds 0.071
1985 59,329 16.41 Lebanese Pounds 0.21
1990 1,973,000 695.20 Lebanese Pounds 18
1995 18,027,607,000 1,621.33 Lebanese Pounds 81
2000 25,143,000,000 1,507.46 Lebanese Pounds 100
2005 33,243,000,000 1,507.48 Lebanese Pounds 105
2007 37,243,000,000 1,507.48 Lebanese Pounds 103
2009 41,243,000,000 1,507.48 Lebanese Pounds 101
2011 63,243,000,000 1,507.48 Lebanese Pounds 99

The following table shows the main economic indicators in 1980–2017.[47]

Year 1980 1985 1990 1995 2000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
GDP in $
(PPP) 		15.33 Bln. 27.70 Bln. 12.64 Bln. 25.34 Bln. 32.90 Bln. 43.43 Bln. 46.11 Bln. 51.75 Bln. 57.65 Bln. 63.93 Bln. 69.91 Bln. 72.01 Bln. 75.39 Bln. 78.63 Bln. 81.64 Bln. 83.20 Bln. 85.11 Bln. 87.78 Bln.
GDP per capita in $
(PPP) 		6,013 10,863 4,674 8,352 10,169 11,032 11,301 12,501 13,772 15,053 16,104 16,430 17,038 17,769 18,450 18,803 19,050 19,439
GDP growth
(real) 		1.5 % 24.3 % −13.4 % 6.5 % 1.1 % 2.7 % 1.7 % 9.3 % 9.2 % 10.1 % 8.0 % 0.9 % 2.8 % 2.6 % 2.0 % 0.8 % 1.0 % 1.2 %
Inflation
(in Percent) 		23.9 % 69.4 % 68.9 % 10.3 % −0.4 % −0.7 % 5.6 % 4.1 % 10.8 % 1.2 % 9.6 % 4.5 % 6.6 % 4.8 % 1.9 % −3.7 % −0.8 % 4.5 %
Government debt
(Percentage of GDP) 		... ... ... ... 146 % 179 % 183 % 169 % 161 % 144 % 137 % 134 % 131 % 138 % 139 % 142 % 151 % 153 %

See also[edit]

References[edit]

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  9. ^ "Lebanon, Government of Credit Rating, Moody's". 21 January 2019.
  10. ^ "Fitch revises Lebanon to Negative".
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  12. ^ a b "GDP growth(annual %)". Worldbank. Retrieved 29 January 2019.
  13. ^ Barrington, Lisa (30 August 2017). "Lebanon embarks on long-delayed reforms but debt problems mount". Reuters. Retrieved 14 October 2017.
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  17. ^ "Lebanon". The World Factbook. Central Intelligence Agency.
  18. ^ "Economics, Business, and the Environment — GDP: GDP per capita, current US dollars". EarthTrends. Archived from the original on 31 January 2008. Retrieved 31 December 2008.
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  20. ^ "Deconstructing Beirut's Reconstruction: 1990–2000". Center for the Study of the Built Environment. Archived from the original on 20 January 2002. Retrieved 31 October 2006.
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  22. ^ a b "Lebanon Economic Report: 2nd quarter, 2006" (PDF). Bank Audi. Archived from the original (PDF) on 23 November 2008. Retrieved 17 January 2013.
  23. ^ "Impact of the July Offensive on the Public Finances in 2006" (PDF). Lebanese Ministry of Finance. Retrieved 17 January 2013.
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  29. ^ a b Cooper, Kathryn (5 October 2008). "Where on earth can you make a decent return?". The Sunday Times. London. Archived from the original on 25 May 2010. Retrieved 28 January 2010.
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  31. ^ "Influx of Syrian Refugees Continues to Impact Lebanese Economy". Fanack.com. Retrieved 25 July 2016.
  32. ^ a b "total Lebanese imports(2000-2017) by value" (PDF). Ministry of economy. Retrieved 10 February 2019.
  33. ^ a b {{cite web |url=https://www.economy.gov.lb/media/11171/exports-value-2000-2017.pdf |title=total Lebanese exports (2000-2017) by value |accessdate=10 Feb 2019
  34. ^ a b "PEOPLE AND CORRUPTION: MIDDLE EAST & NORTH AFRICA SURVEY 2016". Transparency international. 3 February 2019. pp. 9–13.
  35. ^ "Exclusive: Lebanese draft budget reduces deficit to below 9 percent of GDP - finance minister". Reuters. Retrieved 17 April 2019.
  36. ^ https://investinlebanon.gov.lb/Content/uploads/Legal_Framework_for_Ownership_of_Land_in_Lebanon.pdf
  37. ^ "Qatar Muscles in on Saudi Arabia With Lebanon Investment". The Wall Street Journal. Retrieved 21 January 2019.
  38. ^ "Qatar Starts to Make Good on $500 Million Bond Pledge to Lebanon". Bloomberg. Retrieved 27 June 2019.
  39. ^ Global Investment House.Lebanon Economic and Strategic Outlook (Nov 2008) Retrieved 28 June 2009.
  40. ^ Background Note: Lebanon "www.washingtoninstitute.org". Retrieved 3 December 2006.
  41. ^ International Organization for Migration."Lebanon - Facts and Figures" Retrieved 13 June 2009.
  42. ^ Reuters."FACTBOX: Facts on Lebanon's economy" Retrieved 13 June 2009.
  43. ^ Robert F. Worth (24 December 2007). "Home on Holiday, the Lebanese Say, What Turmoil?". The New York Times. Retrieved 20 April 2015.
  44. ^ "Market Capitalization". Beirut Stock Exchange. Retrieved 23 January 2019.
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  46. ^ "Lebanon Monetary Report". International Monetary Fund. Retrieved 31 December 2008.
  47. ^ "Report for Selected Countries and Subjects". Retrieved 30 August 2018.

External links[edit]

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