BEIRUT: The Lebanese may be known for wasting golden opportunities but they are just as famous for their astonishing comebacks. After slipping in January, Lebanese commercial bank deposits regained momentum and rose 4.4 percent to $113.4 billion in the first nine months of 2011, according to data provider Economena Analytics.

The surprising ability of Lebanon’s banks to attract deposits despite internal political instability and regional turmoil stands in stark contrast to the dismal growth witnessed at banks in the United Arab Emirates, where deposit growth slowed considerably in recent months to finish the first nine months up only 1.7 percent to $290.6 billion.

The UAE has promoted itself as a regional hub for the financial sector and as a safe haven for investors and banks.

“What is happening in Syria is certainly playing a role but Egyptian and Libyan events, in addition to Europe’s crisis, are also contributing to deposit growth in Lebanon," said Simon Neaime, chair of the economics department at the American University of Beirut (AUB), in an interview with The Daily Star Tuesday.

Some argue that the consistent increase in deposits, which brought $6.2 billion in fresh private funds into the banking sector by September, is tainted by inflows from key Syrian figures escaping a worldwide asset freezes.

However, Lebanon’s Central Bank, along with a streak of industry pundits, have denied the claim and pointed to the sector’s strict fund deposit protocols and to the implementation of any U.N. decisions. The small size of the country’s non-resident deposits and the meager increase of less than $2 billion through September provide little support to the critics’ claims, although some doubts remain.

	Loans are not being channeled into the real economy to stimulate economic growth

In addition to its current stability relative to other Levant countries, Lebanon is benefiting from Europe’s vicious debt crisis and the world’s low interest rates. Lebanon’s overnight interbank rates are almost 10 times their UAE equivalents as the Central Bank relies on high interest rates to defend the dollar peg.

Interest from Europe cannot be underestimated. While Arab tourist numbers fell 39 percent in the first nine of 2011, tourists from European countries were down only 10 percent: a sign of confidence in the tiny Mediterranean country.

Nevertheless, in an interview with The Daily Star, Georges Nehme, chair of the business administration department at Antonine University, attributed the mismatch in deposit growth rates to UAE-related events.

“I think this is due to UAE factors because we haven’t seen in Lebanon any major change at the monetary policy level to attract additional deposits,” said Nehme.

Bankers in the Gulf country attribute the reversal in deposits to the deceleration of foreign fund inflows as a result of the “Arab Spring” and to less attractive interest rates while government officials claim the funds are being redirected to investment instruments with higher returns.

Yet deposits are just as good as their economic impact and in this regard Lebanon seems to be back to the old habit of wasting opportunities.

Deposit growth, albeit slower than in previous years, continues to exceed the increase in lending, starving the economy of needed funding for growth. Lebanese commercial bank claims rose by $1.3 billion in the first nine months of 2011, with only $800 million going to the private sector, while UAE’s banks gave out nearly $12 billion in loans.

“We have had this issue for a while now. Loans are not being channeled into the real economy to stimulate economic growth, but hopefully with more liquidity, things may improve,” said Neaime.