Central Bank Governor Riad Salameh is forecasting near zero growth for the Lebanese economy and possibly negative inflation this year.
But Salameh said capital inflows would help the national currency remain stable within the Central Bank intervention band of LL1,501-1,514 to the dollar.
Lebanon, he said, was on course to maintain a positive balance of payments this year after a $20 million surplus up to August.
“This year we don’t see growth happening. Our forecast until now is that maybe we’ll be near zero. Inflation would also be near zero, maybe a little bit negative,” Salameh said.
Central Bank figures show 1 percent growth and zero inflation in 1999. Independent estimates had put growth at negative.
The next government, the governor said, had to solve daunting fiscal problems, the subject of increasing concern with international rating agencies.
“I think there is consensus that we need to have restructuring in our economy to get the fiscal situation under control,” he said.
Both Standard & Poor’s and Moody’s have said they might downgrade Lebanon if the fiscal situation continued to slide.
The budget deficit rose to 53 percent of spending up to July. According to Central Bank figures, public debt stands at more than 135 percent of the gross domestic product, .
“We believe that things can be adjusted in Lebanon if the political will is there. The restructuring program is already known. It aims essentially at realizing privatization and administrative reform, and having a pro-business approach from the government,” Salameh said.
“Still we need to see the people who would execute it and this would have to wait some time,” he added.
On the positive side, Salameh also forecast the benchmark 14 percent return on two-year Treasury bills to remain the same, especially as no movement is expected upward in US interest rates. - Reuters