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

On Everest, Helicopters Rescue Stranded Climbers

Choppers transport some of more than 100 mountaineers trapped after deadly quake, avalanches More

Video Ten Years After Riots, France Searches for Answers to Neglected Suburbs

In 2005, a Paris suburb exploded into violence after two teenagers were electrocuted as they hid from police; since then, somethings have changed, others not More

US, Japan Announce Historic Revision of Defense Cooperation Guidelines

Nations say new guidelines will be 'cornerstone for peace and security' in Asia-Pacific region while also serving as 'platform for a more stable international security environment' 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.
‘Angel of the Migrants’ Helps Desperate Syrians Arriving in Europei
X
Henry Ridgwell
April 26, 2015 10:36 PM
Waves of migrants are continuing to arrive on the shores of southern Italy from North Africa. After their dangerous journey across the Mediterranean, they face an unknown future in Europe. In the Sicilian city of Catania there is an activist dedicated to helping the refugees on their journey.
Video

Video ‘Angel of the Migrants’ Helps Desperate Syrians Arriving in Europe

Waves of migrants are continuing to arrive on the shores of southern Italy from North Africa. After their dangerous journey across the Mediterranean, they face an unknown future in Europe. In the Sicilian city of Catania there is an activist dedicated to helping the refugees on their journey.
Video

Video Ten Years After Riots, France Searches for Answers to Neglected Suburbs

January’s terrorist attacks and fears of more to come are casting a spotlight on France’s neglected suburbs. Home to many immigrants, and sometimes hubs of crime, they were rocked by rioting a decade ago. Lisa Bryant visited the Paris suburb of Clichy-sous-Bois, where the 2005 violence first broke out, and has this report about what has changed and what has not.
Video

Video Gay Marriage Goes Before US Supreme Court

This week, the U.S. Supreme Court will hear arguments on whether gay people have a constitutional right to marriage. VOA’s Michael Bowman reports, the case could lead to the nationwide legalization of same-sex marriage, or a continuation of the status quo in which individual states decide whether to recognize gay unions.
Video

Video Study: Insecticide Damaging Wild Bee Populations

A popular but controversial type of insecticide is damaging important wild bee populations, according to a new study. VOA’s Steve Baragona has more.
Video

Video Data Servers Could Heat Private Homes

As every computer owner knows, when their machines run a complex program they get pretty hot. In fact, cooling the processors can be expensive, especially when you're dealing with huge banks of computer servers. But what if that energy could heat private homes? VOA’s George Putic reports that a Dutch energy firm aims to do just that.
Video

Video Cinema That Crosses Borders Showcased at Tribeca Film Festival

Among the nearly 100 feature length films being shown at this year’s Tribeca Film Festival in New York City are more than 20 documentaries and features with international appeal, from a film about a Congolese businessman in China, to documentaries shot in Pakistan and diaspora communities in the U.S., to a poetic look at disaffected South African youth. VOA’s Carolyn Weaver has more.
Video

Video UN Confronts Threat of Young Radicals

The radicalization and recruitment of young people into Islamist extremist groups has become a growing challenge for governments worldwide. On Thursday, the U.N. Security Council heard from experts on the issue, which has become a potent threat to international peace and security. VOA’s Margaret Besheer reports.
Video

Video Growing Numbers of Turks Discover Armenian Ancestry

In a climate of improved tolerance, growing numbers of people in Turkey are discovering their grandmothers were Armenian. Hundreds of thousands of Armenians escaped the mass deportations and slaughter of the early 1900's by forced conversion to Islam. Or, Armenian children were taken in by Turkish families and assimilated. Now their stories are increasingly being heard. Dorian Jones reports from Istanbul that the revelations are viewed as an important step.
Video

Video Migrants Trek Through Western Balkans to Reach EU

Migrants from Africa and other places are finding different routes into the European Union in search of a better life. The Associated Press followed one clandestine group to document their trek through the western Balkans to Hungary. Zlatica Hoke reports that the migrants started using that route about four years ago. Since then, it has become the second-most popular path into Western Europe, after the option of sailing from North Africa to Italy.
Video

Video US Businesses See Cuba as New Frontier

The Obama administration's opening toward Cuba is giving U.S. companies hope they'll be able to do business in Cuba despite the continuation of the U.S. economic embargo against the communist nation. Some American companies have been able to export some products to Cuba, but the recent lifting of Cuba's terrorism designation could relax other restrictions. As VOA's Daniela Schrier reports, corporate heavy hitters are lining up to head across the Florida Straits - though experts urge caution.
Video

Video Kenya Launches Police Recruitment Drive After Terror Attacks

Kenya launched a major police recruitment drive this week as part of a large-scale effort to boost security following a recent spate of terror attacks. VOA’s Gabe Joselow reports that allegations of corruption in the process are raising old concerns about the integrity of Kenya’s security forces.
Video

Video Japan, China in Race for Asia High-Speed Rail Projects

A lucrative competition is underway in Asia for billions of dollars in high-speed rail projects. Cambodia, India, Indonesia, Malaysia Thailand and Vietnam are among the countries planning to move onto the fast track. They are negotiating with Japan and the upstart Chinese who are locked in a duel to revolutionize transportation across Asia. VOA Correspondent Steve Herman in Bangkok has details.
Video

Video Scientists: Mosquitoes Attracted By Our Genes

Some people always seem to get bitten by mosquitoes more than others. Now, scientists have proved that is really the case - and they say it’s all because of genes. It’s hoped the research might lead to new preventative treatments for diseases like malaria, as Henry Ridgwell reports from London.
Video

Video Bible Museum Coming to Washington DC

Washington is the center of American political power and also home to some of the nation’s most visited museums. A new one that will showcase the Bible has skeptics questioning the motives of its conservative Christian funders. VOA religion correspondent Jerome Socolovsky reports.
Video

Video Afghan First Lady Pledges No Roll Back on Women's Rights

Afghan First Lady Rula Ghani, named one of Time's 100 Most Influential, says women should take part in talks with Taliban. VOA's Rokhsar Azamee has more from Kabul.

VOA Blogs