BEIRUT: Central Bank Governor Riad Salameh downplayed Lebanon’s anemic 2 percent growth in 2012, saying that considering the regional situation, “one could not expect to have better than this.”
Speaking to Bloomberg News, the governor claimed that the worst of the problems were behind the country, citing reduced exposure to the Syrian banking market, a strong pound and the “well-received” stimulus package unveiled recently.
While there has been much concern over the effect of the drawn-out conflict in Syria, the governor said the exposure of Lebanese banks to the Syrian economy had decreased by 60 percent and therefore no longer warranted special measures.
“The situation is now under control and we do not expect any negative surprises from the situation in Syria on the banks. They are not planning to pull out, but they have scaled down their operations and they are in a wait-and-see situation. They are aware of the commercial risks and they are respecting the sanctions,” the governor said.
Salameh voiced hope that the effect of the conflict on the wider economy would also be manageable, while acknowledging the uncertainty of the political and security situation:
“As long as we can keep the political and security situation under control, I think what we have lived in 2012 and the correction that happened has given a certain base to our economy from which we can rebuild again.
“We are today better equipped to face pressures or tensions than we were before because we have more resources and the markets have confidence in the banking sector and the Central Bank.”
The governor cited the low interest rates that the government was paying for its debt as evidence that the market agreed with his prognosis.
“You can see it in the levels of interest rates where, for a country rated B, the markets are lending at much lower rates than other countries having the same rating,” Salameh said.
Salameh reiterated his confidence in Lebanon’s currency: “The Lebanese pound is stable. We have seen offerings of dollars during the first 45 days of this year. The Central Bank was a net buyer of dollars in the market and interest rates are stable in the country.”
While the pound may be secure, inflation in the country stood at 6 percent for 2012 and Salameh said the Central Bank would aim to hold inflation to 4 percent for this year.
Commenting on the stimulus package unveiled last month, the governor explained that the plan “has been well received by the market.”
“The purpose was to give a boost to growth,” he said, adding that it may contribute as much as 2 to 3 percentage points to GDP growth this year.