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GDP Growth Projected at 1.6% in 2012

Business Monitor International revised downward its projection for Lebanon real GDP growth to 1.6% in 2012 from an earlier forecast of 2.8%.

It attributed the change to a weak domestic security environment, political paralysis, unrest in Syria and higher global oil prices that are all undermining the country's growth outlook, as reported by Lebanon This Week, Byblos Bank newsletter. It noted that the Central Bank's monthly Coincident Indicator, which constitutes a measure for the underlying health of the economy given the absence of timely official GDP data, continues to reflect weak economic activity.

 

Further, it expected the tourism industry to slow down further during the remainder the year, given the sharp deterioration in Lebanon's security environment. It added that the recent security breaches led Saudi Arabia, Qatar, Kuwait and the UAE to advise their citizens against traveling to Lebanon. It noted that this will negatively impact the tourism industry as visitors from Saudi Arabia account for around 20% of tourist spending, while those from the UAE, Kuwait, Qatar and Bahrain account for 25% of such expenditures.

Also, BMI pointed out that political instability is undermining consumption and investment patterns in the country. It said that consumer confidence has yet to recover from the initial sharp fall posted at the start of 2011. It added that the number of trans- actions in points-of-sale, which is used as a measure of retail sales, increased by less than 1% for eight consecutive months in May 2012. It noted that consumers are continuing to delay purchases given the political and economic uncertainty in the country.

 

In parallel, BMI considered that Lebanon's growth outlook will remain linked to the unrest in Syria, as the risk of spillovers will prevent a more robust economic recovery.

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