BEIRUT: Lebanon’s net private capital inflow in 2013 is expected to plunge by 42 percent to $2.9 billion, the fifth lowest in emerging markets, the London-based Institute of International Finance said.
The IIF projected net private capital inflows to Lebanon at $2.9 billion in 2013, constituting a decline of 41.7 percent from $5 billion in 2012 and compared to inflows of $6.3 billion in 2011, $5.8 billion in 2010 and a peak of $12 billion in 2009.
The IIF reached this figure after deducting the gross capital inflow from the gross capital outflow. But the institute did give figures about the gross capital inflows and outflows.
The capital inflow figures include remittances from Lebanese expatriates, purchase of properties and Foreign Direct Investment. The Central Bank, which usually releases statistics on capital inflows, does not give a breakdown nor explain the share of each sector from the cash injection.
Economists attribute the fall in net capital inflows to the tense political and security situation in Lebanon as well as the fallout of the long running Syrian conflict.
“This reflects the investor’s sentiment given the prevailing uncertainty in the country and the strong linkage to the Syrian crisis,” Nassib Ghobril, head of economic research at Byblos Bank, told The Daily Star.
He said the other reason behind this projection was the structural weakness in the economy that discouraged a high level of FDI.
“In addition to these factors, we have the high cost of doing business and the lack of administrative reforms,” Ghobril stressed.
The head of Investment Development Authority of Lebanon, Nabil Itani, predicted earlier that FDI to Lebanon would fall by 25 percent in 2013 due to the political turmoil and absence of a government.
Former Finance Minister Jihad Azour said the expected reasons were the poor political and security conditions in the country.
“These are bad news for investments and investors react accordingly. We also have fewer investment opportunities because there is no government to run the affairs of the country,” Azour said.
IIF said that the expected drop in net inflows this year would be the sixth steepest among 30 emerging markets with available figures, slower than only Argentina, South Korea, Poland, Thailand and Venezuela.
Lebanon’s decline would also be the steepest in the IIF’s Africa and Middle East grouping.
Net private capital inflows to Lebanon are expected to account for 0.3 percent of total flows to emerging markets and for 3.5 percent of aggregate flows to Africa and Middle East economies in 2013.
The IIF said Lebanon would be the second smallest recipient among countries in the Africa and Middle East region, better than only Egypt.
Net private capital inflows to Lebanon are expected to be equivalent to 6.7 percent of GDP in 2013, the sixth highest share among emerging markets and lower than only Chile, Ukraine, Nigeria, Peru and Russia.
It would also constitute the second highest share among Africa and Middle East economies behind Nigeria.
IIF said that net private capital inflows to Lebanon fell by 20.9 percent in 2012 and posted the ninth steepest decline among emerging markets and the third steepest in the region economies. They accounted for 0.4 percent of total net private capital inflows to emerging markets and for 6.5 percent of aggregate flows to ME&A economies last year.
However, IIF gave a more optimistic projection next year, forecasting net private capital inflows to Lebanon at $4.3 billion in 2014.
That would constitute an increase of 48.8 percent from 2013 but remains well below the average of $7.5 billion per year between 2008 and 2011.
The expected increase in Lebanon’s capital inflows in 2014 would be the second largest among emerging markets and regional economies.