Special Report: Syria & Lebanon - Beirut has a huge debt mountain to tackle

24 August 2010

With its economy forecast to expand by 8 per cent in 2010, Lebanon is second only behind Qatar in the Middle East in terms of economic growth. Yet, despite this, analysts continue to question the long-term sustainability of Lebanon’s expanding economy

Yet, despite this, analysts continue to question the long-term sustainability of Lebanon’s expanding economy.

Its tourism, real estate and banking sectors are all performing well, yet Lebanon is struggling to eradicate a debt mountain that stands at 148 per cent of gross domestic product (GDP).

The country’s public debt is the third-largest in the world. Its current account deficit is expected to increase this year, as is its fiscal deficit.

Economists also fear a possible collapse in the real estate sector due to a perceived bubble in property prices.

Most critical of all to the country’s economic success is its political stability. In 2006, when war broke out between Hezbollah and Israel, economic growth that year was restricted to just 0.6 per cent.

Since the Doha agreement in 2008, Lebanon has enjoyed two years of peace and stability. But with so many deep-rooted conflicts both inside and outside its borders, the spectre of a new crisis is never far away. Should political tensions lead to renewed violence, all the gains of the past two years would be lost.

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