BEIRUT: Lebanon slipped into the 10th place among 11 Arab countries in terms of macroeconomic risks in 2014, Cairo-based investment bank EFG Hermes said.
The bank’s “Macroeconomic Heat map for 2014” report said that Lebanon’s ranking fell from ninth place in 2012 and 2013, compared with its 7th place ranking in 2011.
EFG Hermes attribute the fall to the tense political situation in Lebanon and the region as well as economic slowdown.
The view reflects the negative outlook of international rating agencies as well as the International Monetary Fund and the World Bank.
EFG Hermes said Lebanon received a score of 52.9 points on a maximum possible score of 100.
The report was carried by Byblos Bank’s weekly news bulletin.
The heat map provides a holistic snapshot and points of comparison across the region, and reflects changes to growth forecasts and economic indicators affected by recent political developments.
It is a composite of 17 variables grouped in four broad categories of indicators: growth outlook with a 35 percent weight, other key macroeconomic indicators at 30 percent, socioeconomic conditions at 25 percent, and stock market investability at 10 percent.
“In 2011, EFG Hermes changed the weighting of the categories to take into account greater political risks and changes in socioeconomic fundamentals, which are of increased importance for investors. It also assigned scores to individual variables in each category ranging between 68 and 100 points for the ‘strongest’ score, between 34 and 67 points for the ‘middle’ category, and between zero and 33 points for the ‘weakest,’” the report added.
The report praised the performance of the Cabinet, although it warned that the challenges for this government were quite high.
“EFG Hermes considered that the formation of the new government in February is a positive step toward a relatively more stable political environment, mainly in the context of a deteriorating security situation in the past few months,” the report said.
The government’s future hung in the balance Friday as ministers made a last-ditch effort to agree on a policy statement before a constutonal deadline.
The report emphasized that the robust banking sector, steady capital inflow and adequate foreign currency reserves had contained to some extent macroeconomic risks.
EFG Hermes placed Lebanon’s economic growth rate in the weakest category, along with Egypt and Morocco, but it came in the middle category in terms of its positioning in the global economy. Lebanon also came in the weakest category in investment implementation.
“Further, Lebanon came in the ‘strongest’ category for its annual growth in private sector credit and foreign currency reserves relative to GDP, as well as for its annual average exchange rate change against the U.S. dollar. However, it came in the ‘weakest’ segment for its fiscal and current account balances relative to GDP, as well as for its short-term external debt and current account balance as a percentage of foreign reserves,” the report said.