BEIRUT: Representatives of Lebanon’s private sector and government officials met Monday to discuss measures to prop up the country’s ailing economy against the backdrop of a political impasse and a deteriorating security situation.
The National Economy, Commerce and Industry Parliamentary Committee held a three-hour meeting attended by the finance and economy ministers, the Central Bank governor and leading figures of the Economic Committees, a group representing the private sector.
Nicolas Chammas, head of the Lebanese Traders Association and a member of the Economic Committees, told The Daily Star that participants were looking to halt the decline in leading economic indicators.
Mohammad Choukeir, head of the Chamber of Commerce and Industry of Beirut, told The Daily Star that though Lebanon’s monetary situation remained stable, the decline in economic activity was alarming.
Among the declining indicators, Chammas highlighted the drop in retail sales.
The Beirut Traders Association-Fransabank Retail Index due to be released soon shows an 11.5 percent decline in the second quarter of 2013 compared to the same period last year, Chammas said.
The fall has resulted from a drop in demand by local residents and a declining number of tourists, mainly from Gulf countries.
The purchasing power of local residents has weakened due to rising unemployment and competition from cheaper foreign labor, mainly Syrian refugees in Lebanon, Chammas said.
Besides competing with Lebanese labor, Syrian refugees in Lebanon have opened up illegal businesses, which according to Choukeir represent a growing drain on the economy.
Chammas said that lower retail sales were also a result of travel advisories issued by Gulf governments warning their citizens, who account for between 60 to 70 percent of tourism spending in Lebanon, against visiting the country.
Lebanon’s tourism industry, which used to account for nearly a fifth of GDP a few years ago, lost approximately $40 million in revenue during the Eid al-Fitr holiday earlier this month as security incidents broke out across the country, industry officials have told The Daily Star.
The number of visitors to Lebanon fell by about 6.5 percent during the first half of 2013 compared to the same period last year. In July, the number of tourists was down by 27 percent.
Tourism figures were already sharply down last year, with 1.5 million visitors compared to a peak of 2 million in 2010.
Chammas said the Beirut Traders Association had discussed with the Central Bank governor the possibility of offering subsidized loans to support commercial investments by traders.
Last January, the Central Bank gave $1.46 billion in credit facilities to commercial banks at a 1 percent interest rate to provide subsidized loans targeting mainly the real estate sector.
The latest Finance Ministry figures show that the number of real estate transactions dropped 7 percent in the first half of 2013 compared to the same period last year.
The figures follow declines of 8 percent in the first half of 2012 and 11.3 percent in the same period of 2011.
The Institute of International Finance has forecast a large drop in net private capital inflows.
Net private capital flows have steadily declined from a peak of $12 billion in 2009 to $2.4 billion in 2012 and are forecast to fall to just $1.6 billion in 2013, more than 30 percent lower than last year, according to the IIF.
The Lebanese economy contracted between 0.5 and 1 percent in the first half of the year, according to the deputy director of the IFF.
The IFF’s Garbis Iradian had told The Daily Star that Lebanon could only see a rebound to a marginal positive growth the second half of 2013 if security conditions improved and a new Cabinet was formed, ending the political impasse.
If such a scenario doesn’t materialize, it would be the first time Lebanon sees a real GDP contraction since 1989, when it registered a 0.8 percent contraction according to the IMF.
Choukeir urged action from politicians, asking for the prompt formation of a Cabinet to restore stability and confidence in the Lebanese economy.
Choukeir proposed that government officials, in cooperation with the Economic Committees, perform a study forecasting the economic results of a prolonged political crisis for a six-month or year period.
“My proposal is aimed at forcing all political parties to assume their responsibilities,” he said.
The Economic Committees are expected to hold a follow-up meeting this week, Choukeir said.