Negative Syria impact on Lebanon's economy balanced by gains
The volatile situation in Syria has impacted the Lebanese economy, but the picture may not be as bleak as one may think, according to newly released economic data. Bank Audi’s first-quarter report on Lebanon gave a comprehensive breakdown of the main economic indicators in the first three months of 2012.
The report said that despite the decline in the number of foreign tourists to Lebanon, the country managed to attract many Lebanese expatriates who arrived through Rafik Hariri International Airport.
“The decline in the number of tourists by 8 percent over the first quarter is partly a consequence of such security concerns for land trips. However, this seems to be more than compensated by the influx of Lebanese expatriates, as the activity of the Airport of Beirut reported a significant growth of 21.5 percent year-to-date,” the report said.
It added that foreign trade through Syria appears to have been adversely impacted. “Exports through Syria retreated by 11 percent over the first quarter, with transiting merchandise in particular dropping by 16 percent as security drifts widened at the beginning of the current year. The share of exports through Syria as a percentage of total exports fell from 24 percent in the first quarter of 2011 to 18 percent over the first quarter of 2012,” Audi said. But the report stressed that such forgone exports were offset by other destinations, as total exports grew by 20.8 percent over the first quarter of 2012.
“The rise in exports over the period is mainly tied to exports of jeweleryto Europe which accounted for almost half the value of Lebanese exports year-to-date, benefiting from both volume and price effects,” the report said.
Audi indicated that certain Lebanese industries were able to export certain products to Syria that were in short supply in this country. “With some Syrian supply shortages for specific locally manufactured goods due to production failures amid prevailing risks, there has been a growing demand for some Lebanese manufactured goods to bridge the arising gap,” the report said. Most of these goods were related to food products such as sugar.
“Also, as Lebanon continues to enjoy stability in its economy and markets, Syrian short- and mid-term property investors have been increasingly finding safe haven in Lebanese realty since the escalation, providing some support to market prices and turnover,” Audi explained.
The report said that despite the fact that the two economies (Lebanon and Syria) are interconnected, the Lebanese environment has been able to avoid recessionary conditions, growing at a moderate pace despite uncertainties.
“It is within this context that the IMF is forecasting a 3 percent real GDP growth in 2012 and even higher rates over the years to come. It looks like the prevailing deterioration in the regional environment is bearing witness to another episode of noticeable Lebanese economic resistance to external shocks at large,” the report said. Audi admitted the main channel of impact remains tied to investment.
“Amid concerns from the Syrian turmoil spillover effects, investors are somehow postponing large investment decisions in Lebanon, adopting a wait-and-see attitude prior to committing massive investment funds to the domestic market. The proof that investment demand is reporting sluggishness amid uncertainties is the imports of investment goods which rose by a mere 2 percent year-to-date and which turns to almost negative when considering real investment imports,” Audi noted. It said this was yet somehow offset by vigorous consumption demand and which is reporting sustained growth, with imports of consumption goods registering a rise of 50 percent over the first quarter of 2012.