Lebanese Economy May Grow as Much as 6%, Central Bank Head Says
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By Massoud A. Derhally
May 8 (Bloomberg) -- Lebanese central bank Governor Riad Salameh said the economy may grow as much as 6 percent this year should elections in June lead to a stable government.
Lebanon is likely to escape the global recession as remittances from Lebanese working in the Persian Gulf hold up and local banks avoid the worst of the crisis, Salameh, who has previously forecast growth of 4 percent, said in an interview at his office in Beirut. A free and fair election would “enhance investment and consumption in the country,” he added.
Expansion at that pace would cap the fastest three-year expansion for the Mediterranean country since a growth spurt in the early 1990s after the end of a 15-year civil war. Lebanon will hold parliamentary elections on June 7, pitting the Shiite Hezbollah movement and its allies against the pro-Western coalition of Prime Minister Fouad Siniora.
The new government will need to tackle public debt of more than $47 billion, or about 160 percent of gross domestic product, and a projected budget deficit of about $4 billion in 2009. To narrow that shortfall, the government will need to reduce its subsidy to Electricite du Liban, which cost about $1.5 billion last year, and sell two mobile phone licenses, Finance Minister Mohamad Chatah said in an interview last month.
Moody’s Investors Service upgraded Lebanon’s local and foreign currency government bond ratings last month to B2, five levels below investment grade, from B3. Moody’s said the adjustment was due to “substantial improvement in external liquidity, the proven resistance of the public finances to shocks, and the willingness and ability of the country’s resilient banking system to finance fiscal deficits.”
Increasing Bank Deposits
Bank deposits may increase as much 13 percent this year after gaining by about 15 percent to $82 billion in 2008, said Salameh, who has served as central bank governor since 1993.
Lebanese banks avoided the worst of the global credit crunch because Salameh prohibited investments in U.S. subprime mortgages in 2004. Banks are required to hold a third of their foreign-currency deposits in cash and to have a capital adequacy, a measure of a bank’s ability to absorb loan losses, of more than 11 percent on average compared with an international norm of about 8 percent.
There has also been no noticeable slowdown in the flow of money from Lebanese working in the Gulf, Salameh said. Lebanon’s economy gets as much as $6 billion in remittances a year from about 10 million Lebanese living abroad. That’s equivalent to about 20 percent of GDP, according to a March 24 report by Standard Chartered Bank.
To contact the reporter on this story: Massoud A. Derhally in Beirut, Lebanon at [email protected]
Last Updated: May 8, 2009 00:06 EDT
Share | Email | Print | A A A
By Massoud A. Derhally
May 8 (Bloomberg) -- Lebanese central bank Governor Riad Salameh said the economy may grow as much as 6 percent this year should elections in June lead to a stable government.
Lebanon is likely to escape the global recession as remittances from Lebanese working in the Persian Gulf hold up and local banks avoid the worst of the crisis, Salameh, who has previously forecast growth of 4 percent, said in an interview at his office in Beirut. A free and fair election would “enhance investment and consumption in the country,” he added.
Expansion at that pace would cap the fastest three-year expansion for the Mediterranean country since a growth spurt in the early 1990s after the end of a 15-year civil war. Lebanon will hold parliamentary elections on June 7, pitting the Shiite Hezbollah movement and its allies against the pro-Western coalition of Prime Minister Fouad Siniora.
The new government will need to tackle public debt of more than $47 billion, or about 160 percent of gross domestic product, and a projected budget deficit of about $4 billion in 2009. To narrow that shortfall, the government will need to reduce its subsidy to Electricite du Liban, which cost about $1.5 billion last year, and sell two mobile phone licenses, Finance Minister Mohamad Chatah said in an interview last month.
Moody’s Investors Service upgraded Lebanon’s local and foreign currency government bond ratings last month to B2, five levels below investment grade, from B3. Moody’s said the adjustment was due to “substantial improvement in external liquidity, the proven resistance of the public finances to shocks, and the willingness and ability of the country’s resilient banking system to finance fiscal deficits.”
Increasing Bank Deposits
Bank deposits may increase as much 13 percent this year after gaining by about 15 percent to $82 billion in 2008, said Salameh, who has served as central bank governor since 1993.
Lebanese banks avoided the worst of the global credit crunch because Salameh prohibited investments in U.S. subprime mortgages in 2004. Banks are required to hold a third of their foreign-currency deposits in cash and to have a capital adequacy, a measure of a bank’s ability to absorb loan losses, of more than 11 percent on average compared with an international norm of about 8 percent.
There has also been no noticeable slowdown in the flow of money from Lebanese working in the Gulf, Salameh said. Lebanon’s economy gets as much as $6 billion in remittances a year from about 10 million Lebanese living abroad. That’s equivalent to about 20 percent of GDP, according to a March 24 report by Standard Chartered Bank.
To contact the reporter on this story: Massoud A. Derhally in Beirut, Lebanon at [email protected]
Last Updated: May 8, 2009 00:06 EDT
