Economy of Lebanon - Economic Growth

Economic Growth

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. In late 2008, Moody's shifted Lebanon's sovereign rankings from stable to positive, acknowledging its financial security. Moreover, with an increase of 51% in the Beirut stock market, the index provider MSCI ranked Lebanon the world's best performer in 2008. Lebanon is one of the only seven countries in the world in which the value of the stock market increased in 2008. The Lebanese economy experienced continued resilience, growing 8.5 percent in 2008 and seven percent in 2009. According to a report by the World Bank, GDP growth in 2010 should remain steady at seven percent. The report cited multiple factors for Lebanon's recent and predicted growth: less-than-expected declines in exports, steady remittances, increased foreign investment, strong domestic demand, booming tourism, and a thriving financial sector. Since Lebanon enjoyed solid economic performance despite a global recession, The World Bank expects continued growth as the global economy improves in 2010. The World Bank projected economic growth in Lebanon at 3.8% in 2012, compared to growth of 2.5% for the global economy, 5.4% in developing countries, 3.2% in the Middle East & North Africa, 2.5% for the MENA region's oil-importing countries, and 3.4% for countries in the region with poor resources and abundant labor.

Lebanon's projected growth rate for 2012 would make it the third fastest growing economy in the MENA region behind Iraq with growth of 12.6% and Morocco with 4%.

Further, the World Bank forecast Lebanon's current account deficit at 17.2% of GDP in 2012 relative to 20.6% of GDP last year, highest in the region, and compared to a surplus of 2.2% of GDP for the region this year. The Bank said Arab oil importers with links to the European Union will feel the impact of slower European and global growth, mainly through trade in goods remittances. It added that oil importers with GCC links such as Lebanon and Jordan will be more shielded, but will still feel indirect effects from lower activity in the GCC.

In parallel, the World Bank estimated economic growth in Lebanon at 3% in 2011, down from 7% in 2010 and compared to growth of 2.4% in the Middle East & North Africa and 1.8% for countries in the region with poor resources and abundant labor.

Lebanon was the third fastest growing economy in the MENA region in 2011, tying with Algeria and coming behind Iraq with 9.6% and Morocco with 4.3%.

It also estimated Lebanon's fiscal deficit at 5.5% of GDP in 2011, relative to a deficit of 7.3% of GDP for net oil importers in the region. It said that Lebanon's current account deficit stood at 20.6% of GDP in 2011, up from 19.7% of GDP in 2010 and compared to a surplus of 3.7% of GDP for the region.

Also, the World Bank estimated Lebanon's foreign currency reserves at 18.6 months of imports in 2011 compared to 8.4 months of imports for the region's net oil importers, constituting the third highest level in the region behind Algeria with 38 months of imports and Saudi Arabia with 27.3 months of imports.