World Bank Increases Lebanon’s GDP Growth Forecast to 3.85% in 2012
The World Bank issued a report on the MENA in which it indicated that Lebanon would record a real growth of 3.8 % in 2012 up from 3% in 2011,
as reported by Lebanon Weekly Monitor, Bank Audi weekly newsletter. Yet, economic activity could be hurt through the trade channel if the situation in Syria deteriorates.
While the trade with Syria represents a small total share of total Lebanon’s activity, Syria is the main entry point for Lebanese exports and Arab tourists to Lebanon. In 2011, tourist arrivals declined significantly yet to a lesser extent than Arab counties such as Syria, Egypt, Tunisia and Bahrain, it said.
Accordingly, the uncertain political situation and fragile macroeconomic conditions have weakened investor confidence, leading to risks in premia and borrowing costs. CDS spread escalated in Lebanon, a fact mainly attributed to fears that violence will spillover from Syria into Lebanon.
Lebanon posted the second highest decline in Foreign Direct Investment (FDI) after Egypt, recording total inflows of almost $4 billion in 2011 versus $5 billion in 2010.
In parallel, countries with high level of indebtedness, particularly Lebanon, remain significantly vulnerable because they have high external financing and large current account deficit.
According to the World Bank, the fiscal deficit will widen in 2012 compared to 2011 because of the sizable rise in public wages.
Photo Don Hankins
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