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IMF sees Lebanon GDP growth at 0.2 pct

Riad Salameh, Governor of the Central Bank of Lebanon, attends the UAE-Lebanon Investment Forum in Abu Dhabi, UAE, October 7, 2019. REUTERS/Satish Kumar

BEIRUT: The International Monetary Fund Tuesday projected Lebanon’s GDP growth at 0.2 percent in 2019, 0.2 percent in 2020 and 0.9 percent in 2021. The new projection came in the IMF’s global economic outlook.

It did not surprise most economists, who fear the country is sliding into a deep recession as a result of the government’s failure so far to complete the 2020 draft budget, implement reforms, cut the deficit and increase state revenues.

Central Bank Gov. Riad Salameh said the country’s gross domestic product in the first five months of this year was zero percent.

Last week, the World Bank projected Lebanon’s GDP growth in 2019 would fall by 0.2 percent. It said the contraction comes after two years of sluggish growth. The economy grew by 0.6 percent in 2017 and 0.2 percent in 2018, the World Bank said. It forecast a return to small gains in coming years: 0.3 percent in 2020 and 0.4 percent 2021.

If Lebanon’s economy shrinks this year, it will be the first contraction since 1999, according to IMF data.

Kafalat loans to small and medium-sized businesses fell by more than 85 percent in the first eight months of the year, according to Byblos Bank.

The number of new construction permits fell 15 percent in the first eight months of 2019, Byblos Bank said, and the permits’ surface area fell 28 percent. Cement deliveries fell over 30 percent in the first seven months of the year, according to the Central Bank.

The Finance Ministry said real estate transactions in the first nine months of 2019 shrunk by 15 percent compared to the same period last year. It said 36,952 real estate transactions took place, constituting a decrease of 14.6 percent from 43,263 in the same period of 2018.

New car sales continued to drop due to the severe economic slowdown and high interest rates on car loans. According to figures released by the Association of Automobile Importers in Lebanon, the dealers sold 19,865 new passenger cars in the first nine months of 2019 - a decline of 23.8 percent from 26,081 in the same period of 2018.

One bright spot has been tourism, which saw its best season since 2010 with arrivals rising 8 percent in the first eight months of the year, according to Byblos Bank.

That may not be enough to balance out the bad news, though.

If the economy contracts, it could have grave consequences for the government, which is desperate to reduce the deficit. A smaller economy may result in smaller revenues to the state, widening the gap.

 
A version of this article appeared in the print edition of The Daily Star on October 16, 2019, on page 3.

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