Lebanese economy continues to sink, government action needed
The Lebanese economy has continually slipped for the past two years, with a dangerous increase in public debt and declining state revenue, said a report Monday that urged government action.
Lebanon's gross domestic product (GDP) went down by 0.5 percent in the first half of the year compared with the same period in 1999, the seventh straight quarter of decline, said the report by the respected Audi Bank.
"The further decline ... renews fears of a lengthy recession for the Lebanese economy," Audi said.
The report pinned the blame on a nearly 13 percent decrease in public and private investment in Lebanon. Demand, however, grew by three percent, as the government increased spending by 20 percent.
The Lebanese economy expanded after the country's 15-year civil war ended in 1990, but quickly ran out of breath. Growth was at seven percent in 1995 but went down to nil in 1998. Last year the economy sank by two percent, according to Audi Bank.
The country's economic woes will likely be the major issue for Lebanon's new government, which will be take office after the new parliament is inaugurated October 17.
Audi Bank called on the new government to "quickly set up a privatization program and assure the necessary political consensus to put it in place."
"Privatization would bolster growth and improve the productivity of businesses and the competitiveness of public services," the report said.
Nabih Berri, the outgoing parliament speaker, called Wednesday for a national unity government to avoid an economic crash.
Former Prime Minister Rafiq Hariri is favored to return to his former job after he and a leading ally, Druze religious leader Walid Jumblatt, swept legislative elections August 27 and September 3.
Hariri, a construction magnate, spearheaded the post-war boom by encouraging an extensive rebuilding program, which opponents have blamed for plunging the country into debt.
The Audi report noted that the country's recession is accompanied by weak inflation, at only 1.9 percent in annual terms, and that "indicators are pessimistic and fuel a growing malaise."
The bank noted that public debt has grown more quickly than the economy, reaching $22.9 billion at the end of June, of which 5.48 billion is external debt.
The country's debt is now 138 percent of GDP and is expected to pass 140 percent by the end of the year.
Prime Minister Salim Hoss started a five-year plan which aims for two percent growth and a reduction of the debt to 126.7 percent of the GDP.
But service on the debt has reached 103 percent of state receipts, while Lebanon's budget deficit is now at 53.2 percent, compared with an original target of 37 percent.
The overall entry of capital slid 4.8 percent in the first semester compared with the same period last year, while Lebanon's balance of payments had a deficit of $145 million, the same as in the first half of 1999.
For the past five years Lebanon has suffered from a financial crisis due to a lack of investment in the production and service sectors and the high interest rates on the Lebanese pound.
The public purse has been hit hard by the costs of rebuilding from the war and stabilizing the currency despite the growing debt and weak revenue. Corruption and widespread tax evasion is also an important factor. — (AFP)
© Agence France Presse 2000
© 2000 Mena Report (www.menareport.com)