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Lebanon’s Economic Blues Begin to Bite

Lebanon’s Economic Blues Begin to Bite

Tuesday, 21 August, 2018 - 12:00
A man counts Lebanese pounds at an exchange office in Beirut, Lebanon, August 16, 2018. REUTERS/Mohamed Azakir
Asharq Al-Awsat
For Mazen Rahhal, a shop owner in a bustling district of Beirut, Lebanon's economy has seldom felt more precarious. In one store, he sells clothes at a fraction of their previous price. Another, which he rented to a rival business, now lies empty.

Years of gradual stagnation have in 2018 merged with several newer trends: high-interest rates, falling house prices and questions about the currency at a moment of profound uncertainty as politicians wrangle over forming a new government.

For Lebanese businesses and people, economic unease and the lack of a government to take firm control over policy - some three months after they voted in a general election - have become ceaseless sources of worry.

"We are struggling just to manage the costs we have to pay: from electricity, employee wages, everything," said Rahhal. His family has owned shops on Hamra Street, the main business thoroughfare of west Beirut, since the 1970s. As Lebanon rebuilt after its 15-year civil war ended in 1990, there was a period of economic growth, and as in its 1950s and 60s heyday, it drew tourists ready to open their wallets.

But political problems grew over time. The war in neighboring Syria also made matters worse.

Economic growth, which averaged 8-10 percent before the war, has averaged 1-2 percent since it began, and a purchasing managers' index for Blom Bank has shown business activity in decline every month since 2013.
The state owes about 150 percent of the gross domestic product, much of it to local banks, whose own business is partly based on remittances paid into them by Lebanese working abroad, in turn partly drawn by attractive interest rates.

Without a new government, Lebanon cannot institute the fiscal reforms needed to get its debt under control or unlock billions of dollars in pledged foreign investment in infrastructure to get the economy moving. Everybody Reuters interviewed said it was critical for Lebanon to form a government soon.

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