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New data points to brighter economic future

Central Bank governor Riad Salameh attends a conference in Beirut, Monday, June 9, 2014. (The Daily Star/Mohammad Azakir)

BEIRUT: Economic indicators remarkably improved during the first quarter of 2014 following the formation of the national unity government, with local consumption of durable goods expected to increase by 7 percent in 2014, Environment Minister Mohammad Machnouk said.

“Local consumption of durable goods [such as cars and electronics] is expected to go up by 7 percent, while local investment will grow by 5 percent with a slight improvement in foreign direct investment, which will probably result in a real GDP growth rate of 3 percent in 2014,” said Machnouk, who represented Prime Minister Tammam Salam at Monday’s forum on the economic future of Lebanon.

The forum, which was organized by the Central Bank in cooperation with the association of Lebanese industrialists, the General Union of Chamber of Commerce, Industry and Agriculture for Arab Countries and IDAL, is aimed at discussing the future of the country’s economy and the policies that should be adopted in the near future for better financial performance.

Machnouk said that the balance of payments had registered a surplus of $301 million, compared to a deficit of $62 million for the same period last year, which was due to an improvement in deposit flow by 16 percent.

“The value of real estate transactions increased by 36 percent, while the volume of goods moving through the Beirut port went up by 12 percent, which reflects a higher rate of expenditure in the national economy,” he said.

He added that the consolidated assets of commercial banks had increased to $166.5 billion by the end of March 2014, compared to $165 billion by the end of 2013, which had created a state of stability for the Lebanese financial system.

Despite the improvement in economic indicators during the first months of 2014, the economic situation still faces major challenges due to the presence of over 1.3 million Syrian refugees officially registered in Lebanon, Machnouk said.

“We are in great need of curbing the negative repercussions of the flow of the huge number of refugees to Lebanon, especially as it poses a burden of $5.1 billion on the government’s treasury, according to the World Bank report issued in August 2013,” he said.

Central Bank Governor Riad Salameh said that the presidential vacuum in Lebanon was expected to have a negative impact on economic growth after the improvement it had witnessed following the formation of the new government.

Salameh urged the government to take initiative to implement necessary reforms by endorsing a budget and forming a clear financial plan in addition to improving the infrastructure and launching the gas exploration process.

Salameh said that the Central Bank was capable of maintaining the stable exchange rate of the Lebanese pound to U.S. dollar.

He expected deposits to grow by 5 percent to 6 percent this year.

“We are also witnessing stability in interest rates, with a high demand on sovereign bonds in Lebanese pounds and U.S. dollars, while the prices of eurobonds have remarkably improved lately, and the cost of Lebanese premium risk has dropped,” he said.

Salameh’s remarks were echoed by Francois Bassil, president of the Association of Banks in Lebanon, who said that the financial policy adopted by the Central Bank allowed banks to grant funding with favorable conditions for the government.

“Our banks will be able to support the revival of the economy and the modernization of the infrastructure if the security and political situations stabilize, and the first steps toward such an achievement is the election of a president,” he said.

Bassil urged the government to launch the privatization process for the telecommunications sector in addition to restructuring the electricity sector and the National Social Security Fund and increasing the competitive power of Lebanese goods and services locally and outside the country.

Nabil Itani, chairman of the Investment Development Authority of Lebanon, urged the government to set its priorities and develop new policies in order to achieve growth and stability on the economic and social front.

“The biggest challenge facing the government today is the adoption of a strategy that would lead to an increase in growth rate and the achievement of security stability in order to meet investors’ needs in the years to come,” he said.

“The objective of achieving security stability is to protect current investments and attract new ones, especially from Arabs who are considered to be the main and most important investors in the country,” Itani said.

The IDAL chairman praised his group’s efforts to keep in contact with and provide continuous support for all local, regional and international investors, which had translated into an increase in the number of completed projects to 54.

“These projects are worth around $2 billion and they have provided over 6,000 job opportunities.”

Meanwhile, Mohamed Choucair, president of the Chamber of Commerce and Industry, called upon the government to begin with the necessary reform measures that would benefit all Lebanese, but especially those with limited income.

“Reforms will benefit limited income earners more than the salary scale, which will impact our economy in a very negative way,” he said.

Fadi Gemayel, president of the Lebanese Industrialists’ Association, called for the creation of an economic association that would deal with emergency matters and whose objective would be to create an economic strategy aimed at increasing the country’s competitive advantage and securing sustainable development.

“This strategy would work to launch an economic incentive plan aimed at injecting 3 percent of GDP growth, which is equivalent to $1.5 billion, into the national economy,” Gemayel said.

Adnan Kassar, president of the General Union of Chambers of Commerce, Industry and Agriculture for Arab Countries, praised the efforts of Salam’s government, which he said resulted in the removal of a travel warning for Lebanon established by Gulf countries.

“We have great hopes for a tourism season that may be more successful than any previous year following the removal of the travel advisory by the GCC countries,” Kassar said.

 
A version of this article appeared in the print edition of The Daily Star on June 10, 2014, on page 5.

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Summary

Economic indicators remarkably improved during the first quarter of 2014 following the formation of the national unity government, with local consumption of durable goods expected to increase by 7 percent in 2014, Environment Minister Mohammad Machnouk said.

Despite the improvement in economic indicators during the first months of 2014, the economic situation still faces major challenges due to the presence of over 1.3 million Syrian refugees officially registered in Lebanon, Machnouk said.

Salameh's remarks were echoed by Francois Bassil, president of the Association of Banks in Lebanon, who said that the financial policy adopted by the Central Bank allowed banks to grant funding with favorable conditions for the government.

Nabil Itani, chairman of the Investment Development Authority of Lebanon, urged the government to set its priorities and develop new policies in order to achieve growth and stability on the economic and social front.

Mohamed Choucair, president of the Chamber of Commerce and Industry, called upon the government to begin with the necessary reform measures that would benefit all Lebanese, but especially those with limited income.

Fadi Gemayel, president of the Lebanese Industrialists' Association, called for the creation of an economic association that would deal with emergency matters and whose objective would be to create an economic strategy aimed at increasing the country's competitive advantage and securing sustainable development.


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