IMF says refugees continue to dominate Lebanese economy

25 January 2017

Growth is expected to remain subdued in 2017

The Washington-based IMF says the conflict in Syria continues to dominate Lebanon’s economic outlook, with registered refugees accounting for more than one-quarter of the population.

“The refugee presence is straining local communities, adding to poverty and unemployment, and placing further pressure on the economy’s already-weak public finances and infrastructure,” said the IMF in its statement on the Lebanese economy after completing its Article IV consultation in mid-December last year.

The IMF estimates that GDP increased by 1 percent in 2015 and expect a similar growth rate for 2016, and for 2017 it does not expect growth to return to higher levels. “Lebanon’s traditional growth drivers—tourism, real estate, and construction—have received a significant blow and a strong rebound is unlikely based on current trends,” it says.

Inflation declined sharply in 2016 on the back of lower oil prices. It is forecast to return to about 2 per cent by early 2017.

Lebanon elected Michel Aoun as president in October last year, and appointed a Saad Hariri as the prime minister. One of the government’s main challenges will be managing public debt which sat at about 138 per cent of GDP in 2015.

Lebanon: Selected Economic Indicators, 2014–18
 

2014

Act.

2015

Act.

Projections

2016

2017

2018

Output and prices

(Annual percentage change)

Real GDP (market prices)

2.0

1.0

1.0

2.0

2.5

GDP deflator

2.8

0.9

0.9

1.0

1.6

Consumer prices (period average)

1.9

-3.7

-0.7

2.0

2.0

  

Central government finances (cash basis)

(In percent of GDP)

Revenue

21.8

18.8

19.0

19.0

19.2

Expenditure

27.8

26.2

26.9

27.5

28.3

Budget balance

-6.0

-7.3

-7.9

-8.4

-9.1

Primary balance

2.4

1.4

1.1

1.5

1.4

Total government debt

133

138

144

148

151

  

Monetary sector

(Annual percentage change, unless otherwise indicated)

Credit to the private sector

9.3

5.9

1.9

3.0

4.2

Broad money 1/

6.0

4.8

5.5

4.0

4.0

Interest rates (period average, in percent)

     

Three-year Treasury bill yield

6.6

6.6

…

…

…

Five-year Eurobond yield

5.3

5.7

…

…

…

  

External sector

(In percent of GDP, unless otherwise indicated)

Exports of goods (in $, percentage change)

-7.8

2.4

2.4

6.0

5.5

Imports of goods (in $, percentage change)

-2.2

-6.4

4.0

7.0

3.8

Current account balance

-25.3

-18.2

-17.5

-17.4

-17.1

Foreign direct investment

-3.5

-3.4

-4.5

-4.4

-4.7

Total external debt 2/

170

175

179

180

179

Gross reserves ($ bn) 3/

37.3

36.7

40.9

39.4

37.4

In percent of short-term external debt 4/

50.0

46.8

49.4

46.1

42.2

In percent of total banking system deposits

25.8

24.2

25.6

23.8

21.6

      

Exchange rate

1507.5

1507.5

…

…

…

Real effective exchange rate (annual average, percentage change)

1.2

10.0

…

…

… 

Sources: Lebanese authorities; and IMF staff estimates.

1) Defined as currency in circulation plus resident and nonresident deposits.

2) Includes nonresident deposits.

3) Excluding gold and encumbered assets.

4) Short-term debt on a remaining maturity basis, including short-term nonresident deposits. 

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