BEIRUT: With the Lebanese government standing by its projection for 2 percent GDP growth in 2013 despite recent downgrades from international organizations, local economists dismissed any chance of hitting the state’s target.
While downplaying any possibility of the country witnessing negative growth this year, the economists who spoke to The Daily Star suggested that the Finance Ministry and Central Bank did not have the necessary statistics to make accurate forecasts – and had a political interest against improving their predictions.
“I tend to go for the projections of the World Bank and International Monetary Fund, which have estimated Lebanon’s GDP growth at 1.5 percent, instead of the 2 percent rate that is published by the caretaker government and Central Bank,” economist Kamal Hamdan told The Daily Star. “The problem in Lebanon is that we do not have a decent and centralized census department that can give accurate GDP growth based on scientific studies.”
The IMF revised downward its projection in October for real GDP growth in Lebanon to 1.5 percent in 2013 from a previous forecast of 2 percent. The World Bank has also this month revised its projection for GDP growth in Lebanon to 1.5 percent.
Other international investment banks such as Barclays have projected Lebanon’s GDP at less than 1 percent.
However, Caretaker Finance Minister Mohammad Safadi and Central Bank Governor Riad Salameh have insisted Lebanon would achieve 2 percent growth this year despite the negative political atmosphere in the country.
The Finance Ministry and the Central Bank forecast based on economic and financial data they collect each month, but some economists say that these statistics are not comprehensive and a more centralized department is needed to produce accurate projections.
“I prefer to consider the estimates of the World Bank because they have their own internal Lebanese economic bodies. The World Bank uses its own variables in their studies and sometimes they tend to be more conservative in their GDP projections,” said Makram Sader, the secretary-general of the Association of Banks in Lebanon.
“I have raised the issue of creating a more specialized statistics department in order to give accurate projections of the GDP growth.”
Economist Ghazi Wazni agreed that the government projections were too optimistic, suggesting that the GDP growth in 2013 could even be lower than 1.5 percent.
“I think the GDP growth will range between 1.5 percent and 1 percent but it is definitely not 2 percent,” he said.
Regarding the government’s prediction, Wazni suggested that the Finance Ministry and the Central Bank were keen not to present a negative image of the economy for obvious political reasons.
“But experience shows that the projections of the Finance Ministry and Central Bank are not too accurate,” Wazni said. “The IMF revises downward the GDP growth by 0.5 percent or 1 percent after the end of the year.”
Wazni said that he based his prediction on, among other things, the number of tourists visiting Lebanon, the size of the foreign direct investment and the capital inflow.
“Apart from the capital inflow, tourism sector and FDI suffered a big setback. Tourism has dropped by 20 percent at least, while the FDI plunged by 25 percent,” Wazni said. “If we have such facts then how can we say that the GDP [growth] is 2 percent?”
However, Wazni and other economists ruled out the possibility that the country would record negative growth.
“Even if the FDI falls by 20 or 25 percent, we are nevertheless receiving foreign investments, and this by itself is an achievement,” Sader said.
He added that thanks to the remittances of the Lebanese expatriates and the investments made by the locals in other countries in the region, the country was still standing on its feet.
Lebanon has one of the highest remittances to GDP ratio in the world.
The capital inflows amount to more than $8.5 billion annually, and these cash injections have improved the balance of payment, bank deposits, real estate market and consumption.
The economists expressed less certainty about what lay in store for Lebanon in 2014, noting the difficulty of predicting what course the Syrian war or political deadlock in Lebanon would take.
Sader noted the World Bank’s 2014 projection for 2.5 percent GDP growth, saying he found it surprising.
Hamdan declined to give a projection for 2014.
“This projection depends on several factors such as the impact on the Syrian war on Lebanon and the creation of a new Cabinet,” he said. “No doubt the presence of the Syrian refugees has increased consumption thanks to the money they receive from the donor states and international agencies.”