BEIRUT: The Lebanese economy needs a contingency plan to bail it out from its current crisis, the country’s businessmen’s association said Friday, joining calls for the government to abandon increasing the salaries of public sector employees.“It’s true that we avoided the international financial crises because of the actions of the Central Bank,” head of the association Fouad Zumkol said.
“But we are being affected by the international slowdown and unprecedented inflation which has sent production costs skyrocketing.”
Zumkol said the economy has been hit hard by the Arab revolutions that slowed trade across the region.
“It will take a long time before we restore economic relations with these markets that are still in chaos,” he said.
He added that the war escalating in neighboring Syria had dealt a heavy blow to the economy as tourism plummeted and exports slowed.
Sluggish growth rates of no more than 1.5 percent in 2012 could threaten social cohesion, Zumkol warned.
Zumkol said officials should put together a plan to shore up economic conditions: “The government, the private sector, and unions have to sit together and come up with an economic ‘defense strategy.’”
He added that the pay rise for public sector workers is poorly timed given the harsh economic conditions.
“The state cannot currently bear [the wage increases] and the only way to finance it would be to increase taxes or debt: Both are extremely dangerous to the economy,” he said.
Zumkol said the only way forward for the economy is to stimulate growth and keep state expenditures low.
“That’s how you improve purchasing power, state revenues and lower public debt,” he said.
Economy Minister Nicolas Nahas echoed Zumkol’s views, arguing that a 4 percent slowdown in lending, a 30 percent fall in exports and the soaring costs of land transport over in recent months were dangerous indicators.
Commenting on the public sector salary hikes, Nahas said that the government was working with the Economic Committees – a private sector group – to pass the wage increases “in ways that would preserve the financial, fiscal and socioeconomic equilibrium.”
“We are in a situation that requires careful management because we are ahead of [parliamentary] elections,” he added.
Nahas said the government would soon pass a series of draft laws to Parliament that would help provide incentives for private sector investments in infrastructure. “We want the private sector to play the major role in economy,” he said.