News / Middle East

Lebanon’s Economic Path Likely to Remain Unchanged in New Government

A woman walks in front of the building that houses the Arab Bank, center, in downtown Beirut, January 20, 2011
A woman walks in front of the building that houses the Arab Bank, center, in downtown Beirut, January 20, 2011

Lebanon may not have the smoothest of histories, but its economy seems to know how to weather a political storm. After a somewhat bumpy transfer of power last month from one billionaire businessman to another, economists say the country appears on track to maintain its open-market economic policies.

With a public debt of more than $53 billion and a $3 billion deficit, this small Mediterranean nation of 4 million people has some outsized economic issues. But its fiscal challenges have recently been overshadowed by political questions.

The pro-Western government of Prime Minister Saad Hariri collapsed in mid-January, when the Hezbollah-led opposition withdrew from the Cabinet because of  disagreements about the U.N.-backed tribunal investigating the 2005 assassination of Mr. Hariri’s father, a five-time Lebanese prime minister.

After some political bickering, a new prime minister secured the job last week with the support of Hezbollah and other opposition blocs in parliament. Najib Mikati is a 55-year-old telecoms tycoon with a Western education. Some in Lebanon fear he will be beholden to his pro-Syrian and pro-Iranian backers.

New prime minister a moderate

Lebanese Prime Minister designate Najib Mikati speaks during a press conference at the presidential palace in Baabda, east of Beirut, Lebanon, Jan. 25, 2011
Lebanese Prime Minister designate Najib Mikati speaks during a press conference at the presidential palace in Baabda, east of Beirut, Lebanon, Jan. 25, 2011

But American University in Beirut economics professor Samir Makdisi says Mr. Mikati is a moderate in both his economic and political thinking. He says the new prime minister is unlikely to deviate from the current economic course, which saw 8 percent growth last year and a slight fall in the debt and deficit.

“When the Syrians were here, they did not really interfere in economic policy - this is not their interest, this is not their focus and I do not think it is even that much their expertise," he said. "I do not see them at all interfering in issues that have to do with economic and financial policies - except the general rhetoric that we have to take care of the poor, we have to take care of the social, but everyone says that. I don't see him [Mikati] beholden to them on matters of economic policy issues.”

More importantly perhaps, market watchers will be waiting to see what kind of government Mr. Mikati appoints - one of politicians or technocrats - and to see how qualified his finance minister is perceived to be.

“So it seems that the markets are giving the new prime minister a kind of a grace period to see what kind of a government would be formed, what kind of policy statement we are going to have, and on a practical basis, how will be the political climate in Lebanon over the next few months. I think that this is very important as far as the private confidence factor is concerned,” he said.

Dominance of private sector
Barakat says the Lebanese economy is driven by the private sector, which accounts for 80 percent of the Gross Domestic Product.  He says confidence levels are closely tied to political developments and could dictate the pace of economic growth.
“It is the private sector that is [the] generator of economic value added in Lebanon," he said. "All what is needed on behalf of the government is to tighten their belts as much as possible and send the right signals to the private sector for the private sector to invest and consume more and generate more economic value added and drive growth. It is a private-sector economy par excellence.”

Solid banking system
Barakat says that financially, Lebanon’s banking system is one of the strongest in the world with very high liquidity - a strong buffer in turbulent times.
Last week the global credit rating agency Standard & Poor’s downgraded Lebanon’s outlook from “positive” to “stable” because of the political crisis. So how can the new government reassure international investors that Lebanon is not too risky? Makdisi says it is all about economic stability.

“To be extremely clear about his [Prime Minister Mikati’s] macroeconomic blueprint that he’s going to take; the fact that he is going to be controlling the public debt," he said. "The fact that he is going to continue to encourage foreign investment to come in - after all this is basically a free economy. This has always been the case throughout Lebanon's post-independence history. The fundamentals of macroeconomic policy have not really changed.”

Makdisi concludes that Lebanon's macroeconomic imbalances must be taken into account and resolved.  If the new government will find a way to settle them, or at least institute policies that attempt to resolve them, it should be an encouraging signal to investors.

NEW: Follow our Middle East reports on Twitter
and discuss them on our Facebook page.

You May Like

Obama: Alaskans Feel Signs of Climate Change

They're seeing bigger storm surges as sea ice melts, more wildfires, erosion of glaciers, shorelines More

1855 Slave Brochure Starkly Details Sale of Black Americans

Document lists entire families that were up for sale in New Orleans, offering graphic insight into the slavery trade More

Katrina Brought Enduring Changes to New Orleans

The city’s recovery is the result of the people and culture the city is famous for, as well as newcomers and start-up industries More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Colombians Flee Venezuela as Border Crisis Escalatesi
X
August 27, 2015 2:08 AM
Hundreds of Colombians have fled Venezuela since last week, amid an escalating border crisis between the two countries. Last week, Venezuelan President Nicolas Maduro ordered the closure of a key border crossing after smugglers injured three Venezuelan soldiers and a civilian. The president also ordered the deportation of Colombians who are in Venezuela illegally. Zlatica Hoke reports.
Video

Video Colombians Flee Venezuela as Border Crisis Escalates

Hundreds of Colombians have fled Venezuela since last week, amid an escalating border crisis between the two countries. Last week, Venezuelan President Nicolas Maduro ordered the closure of a key border crossing after smugglers injured three Venezuelan soldiers and a civilian. The president also ordered the deportation of Colombians who are in Venezuela illegally. Zlatica Hoke reports.
Video

Video Is China's Economic Data Accurate?

Some investors say China's wild stock market gyrations have been made worse by worries about the reliability of that nation's economic data. And some critics say the reports can mislead investors by painting an unrealistically-strong picture of the economy. A key China scholar says Beijing is not fudging ((manipulating)) the numbers, but that the economy is evolving quickly from smoke-stack industries to services, and the ways of tracking new economic activity are falling behind the change. V
Video

Video Next to Iran, Climate at Forefront of Obama Agenda

President Barack Obama this week announced new initiatives aimed at making it easier for Americans to access renewable energy sources such as solar and wind. Obama is not slowing down when it comes to pushing through climate change measures, an issue he says is the greatest threat to the country’s national security. VOA correspondent Aru Pande has more from the White House.
Video

Video Shipping Containers Provide Experimental Housing

Housing prices around the San Francisco Bay area are out of reach for many people, so some young entrepreneurs, artists and tech industry workers are creating their own houses using converted shipping containers. But as VOA's Mike O’Sullivan reports from Oakland, the effort requires ingenuity and dealing with restrictive local laws.
Video

Video Arctic Draws International Competition for Oil

A new geopolitical “Great Game” is underway in earth’s northernmost region, the Arctic, where Russia has claimed a large area for resource development and President Barack Obama recently approved Shell Oil Company’s test-drilling project in an area under U.S. control. Greg Flakus reports.
Video

Video Philippine Maritime Police: Chinese Fishermen a Threat to Country’s Security

China and the Philippines both claim maritime rights in the South China Sea.  That includes the right to fish in those waters. Jason Strother reports on how the Philippines is catching Chinese nationals it says are illegal poachers. He has the story from Palawan province.
Video

Video Technique May Eliminate Drill-and-Fill Dental Care

Many people dread visiting dentists because they're afraid of drills. Now, however, a technology developed by a British firm promises to eliminate the need for mechanical cleaning of dental cavities by speeding a natural process of tooth repair. VOA’s George Putic reports.
Video

Video China's Spratly Island Building Said to Light Up the Night 'Like A City'

Southeast Asian countries claim China has illegally seized territory in the Spratly islands. It is especially a concern for a Philippine mayor who says Beijing is occupying parts of his municipality. Jason Strother reports from the capital of Palawan province, Puerto Princesa.
Video

Video Ages-old Ice Reveals Secrets of Climate Change

Ice caps don't just exist at the world's poles. There are also tropical ice caps, and the largest sits atop the Peruvian Andes - but it is melting, quickly, and may be gone within the next 20 years. George Putic reports scientists are now rushing to take samples to get at the valuable information about climate change locked in the ice.
Video

Video French Experiment in Integrating Roma Under Threat

Plans to destroy France’s oldest slum have sparked an outcry on the part of its Roma residents. As Lisa Bryant reports from the Paris suburb of La Courneuve, rights groups argue the community is a fledgling experiment on integrating Roma who are often outcasts in many parts of Europe.
Video

Video Kenyans Turn to Agriculture for Business

Each year Kenyan universities continue to churn out graduates for the job market despite the already existing high rate of unemployment among youth in the country. Some of these young men and women have realized that agriculture can be as rewarding as any other business or job, and they are resorting to agribusiness in large numbers as a way of tackling unemployment. Rael Ombuor reports for VOA.
Video

Video First Women Graduate Elite Army Ranger School

Two women are making history for the U.S. Army by proving they are among the toughest of the tough. VOA's Carla Babb reports from Fort Benning, Georgia as 94 men and those two women rise as graduates of the difficult Ranger school.

VOA Blogs