Lebanon's public debt rose 8 percent to $58bn at the end of January from the same month a year earlier as the country copes with a slowing economy and the impact of the two year conflict in neighbouring Syria, according to data from the Association of Banks in Lebanon.
The country has one of the highest public debt stocks in the world, of about 140 percent of gross domestic product at the end of 2012, amassed in the reconstruction phase that followed the end of a 15-year civil war in 1990 and after a month long war with Israel in 2006. The debt to GDP ratio fell gradually from over 180 percent in 2006 to about 130 percent in 2011 before it began to increase again.
"This is the result of the lack of fiscal and structural reforms and the economic slowdown," Byblos Bank Chief Economist Nassib Ghobril told Arabian Business.
A two-year rebellion against the Syrian regime of President Bashar Al-Assad has slowed Lebanon's economy. Gross domestic product has ebbed to about 0.6 percent last year from 1.8 percent in 2011, after an aggregate of 8 percent growth over a three-year period starting in 2007. The number of tourists has declined by 3.7 percent, and construction permits fell by 10.8 percent, according to official figures.
"Consumer confidence was at a record low level in 2012 and continued to be affected by political events and security conditions in the country," said Ghobril. "These are the two main factors unlike other countries where consumer confidence is affected by movements in stock markets, unemployment figures, the numbers of new jobs the economy created and inflation rates."
The budget deficit which has usually hovered at about US$3bn has climbed to about US$4bn as a result of a decline in economic activity and lower tax revenues. The fiscal deficit has increased to about 9.4 percent of GDP in 2012 from 6.1 percent a year earlier.
The government relies on its domestic market to finance its debt rather than international markets.
Foreign direct investment in Lebanon plunged by 68 percent to $1.1bn in 2012 compared with the previous year, the second highest decline among emerging markets, according to data from the Institute of International Finance. FDI inflows accounted for about 2.7 percent of the country's gross domestic product.
"The slowdown has been tremendous and reflects the fact that Lebanon's economy is so services oriented and sensitive to changes in political sentiment domestically and regionally," said Edward Bell of the Economist Intelligence Unit. "The spill over effects from what's going on in Syria has frightened away tourists and kept the economy growing at a slow pace."
Prime minister designate Tamam Salam was asked by Lebanon's president to form a new government last week after Najib Mikati resigned at the end of March. Salam, a son of a prominent prime minister got the backing of 124 lawmakers from the country's 128 members.For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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