BEIRUT: The Institute of International Finance estimated that Lebanon’s GDP growth fell to 0.8 percent in 2012, down from 1.8 percent in 2011, saying the decline highlighted the need for a stable political environment and structural reform.
The IIF said the decline was mainly caused by internal tensions adversely affecting investment, tourism, exports and foreign direct investment.
“The situation in Syria, as well, continues to pose a threat to Lebanon’s economic stability,” the IIF said, noting that the country had so far received an influx of 250,000 Syrian refugees, equivalent to 4 percent of the Lebanese population.
The report was published by Bank Audi’s Lebanon Weekly Monitor.
It added that a small portion of those refugees, considered to be of well-off financially, have mitigated the downturn in certain sectors, mainly the rental market.
The report sheds light on the potential for brighter economic prospects in Lebanon over the medium term.
“A stable political environment along with structural reforms and the recent discovery of large recoverable oil and gas reserves could move the economy to a sustainably higher growth rate over the medium term and bring down the government debt to moderate levels. One important reform is achieving fiscal sustainability,” the IIF said.
It added that this implied a few requirements such as implementing appropriate tax policy and tax administration reforms, while shifting the composition of spending toward growth-enhancing investments supported by improvement in public financial management.
“Another main structural reform should be addressing the chronic problems of the electricity sector. Indeed, transfers to the electricity sector through EDL accounted for 19 percent of GDP. EDL’s weak management including weak enforcement of fees collection and poor governance are the main problems,” the report explained.