Lebanon bombing: The cost to the economy
The deadly explosion in Beirut's Ashrafieh neighborhood will likely deal a crippling blow to the already struggling Lebanese economy, experts told The Daily Star Friday. "The Lebanese economy is not only a victim of the explosion, but it is a major target. The timing is just ahead of the Eid, which we had hoped would revitalize markets,"Mohammad Choukeir, head of the Beirut Chambers of Commerce, told The Daily Star.
Choukeir's remarks were made before reports emerged that the bombing had killed Brig. Gen. Wissam al-Hasan, the head of the police Information Branch. The assassination of such a high-profile security official is likely to scare off foreign tourists, as well as potential investors.
Senior economic officials were unavailable for a comment.
Choukeir said a significant number of Lebanese expats, and some Gulf Cooperation Council citizens in particular, had been keen to visit Lebanon during the holidays. "Now we are sure no one will be here," he added.
Economist Louis Hobeika told The Daily Star that the incident would inevitably result in a major downturn for the Lebanese economy.
"The next few months will see recession, dwindling foreign investment and no tourism,"he said. "The explosion hit at the heart of the Lebanese economy."
Hobeika said the attack also deals a major physiological blow to Lebanese consumers, hinting that consumer confidence and trade would fall sharply during the upcoming months.
Hopes had been high for a rise in tourism during Eid al-Adha, which falls next Friday.
Pierre Achkar, a leading hotelier, had said a slight improvement in hotel bookings had been evident during the past days. Achkar said occupancy rates would increase to nearly 60 percent during the holiday.
Choukeir said that given the already weak tourism, losses for the sector would be significant, but "the situation is already very bad, and we are facing a situation more difficult than during the 2006 conflict with Israel."
Reiterating calls by the Economic Committees, a private sector group, for the government to abandon a pending salary increase for public sector employee, Choukeir said enacting the taxes needed to fund the raise would cripple the economy further.
"The government wants to tax the two sectors fundamental to the economy: real estate and banking. This is unacceptable particularly at such a time," he said.
Lebanon's economy in 2012 had already been struggling, with GDP growth unlikely to exceed 1.2 percent.
According to the Washington-based Institute of International Finance, the second quarter of the year saw the economy contract by 0.3 percent. Expecting the economy to contract another 0.5 percent in the third quarter, it said the Lebanese economy would officially enter a state of recession, defined as two consecutive quarterly contractions in real GDP.