Lebanon: Western Reports Warn of Economic Collapse

Lebanon: Western Reports Warn of Economic Collapse

Sunday, 2 September, 2018 - 09:00
Lebanese Central Bank AFP PHOTO / Joseph BARRAK
Beirut - Asharq Al-Awsat
A number of Lebanese MPs and experts have played down the country's economic crisis following Western press reports that warned of the collapse of the Lebanese economy in case of further delay in forming the government.

In its recent report, the Economist warned that a crisis looms over Lebanon’s economy, indicating that the “country is tipping into a property slump—and perhaps a banking crisis that threatens its currency. An economic crash could destabilize a country already swamped with refugees and plagued by sectarian divides.”

The Economist noted that currency devaluation would be painful for a country that imports so heavily. In addition, it noted that construction in Lebanon is slowing.

“The number of permits issued in the first half of 2018 was 9% lower than in the same period last year. Property transactions dropped by 17% year on year in the first quarter,” stated the Economist, adding that the central bank subsidized mortgages and used to offer 30-year loans with interest rates as low as 3 percent, abruptly halted the scheme last March.

Head of the Finance and Budget committee, MP Ibrahim Kanaan explained there are no risks to the financial situation in Lebanon.

Kanaan asserted that Lebanon is the most stable when compared to other economies, stressing that "we are the most stable in Lebanon", after establishing a reformist vision and financial reforms

Lebanese financial expert, Walid Abu Sulaiman, downplayed Western reports warning of the dangers of the economic situation, pointing out "they did not reveal anything surprising or new to the situation of the Lebanese economy because these facts are known.”

Abu Sulaiman told Asharq Al-Awsat that the remarkable thing is that Standard & Poor’s Global Ratings affirmed its B/B- long and short-term foreign and local currency sovereign credit ratings on Lebanon, pointing out that the outlook remains stable.

“The Central Bank has enough foreign currency reserves to defend the Lebanese pound in case of any incalculable developments, and prevent its deterioration,” he said.

"The banking sector in Lebanon is solid," said Abu Sulaiman, adding that banking deposits have grown to an acceptable level of more than $180 billion, giving a unique indication especially that deposits are over three times the GDP size.

"The delay in the formation of the new cabinet has an undeniable impact on investments and therefore on growth," chief economist at Bank Audi Marwan Barakat told Agence-France Presse (AFP).

Barakat said seven of 11 economic indicators he studied were "in the red" in the first seven months of 2018 compared with the same period last year.

He spoke of the deterioration of 7 economic indicators, out of 11, in the first seven months of this year, including the stagnation in the real estate sector, where building permits fell by 20.1 percent.

The value of cleared checks, an indicator of investment and consumption, dropped 13 percent between January and June this year, according to Lebanon's central bank.

In addition, banks increased the interest rate on Lebanese Lira, reaching 15 percent, with public debt standing at $82 billion, equivalent to 150 percent of GDP, the third highest worldwide after Japan and Greece.

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