Syrian crisis drags on Lebanon’s economy
It is hard to find any expert or economist who will confidently say that Lebanon has escaped the raging political and security turmoil in neighboring Syria unscathed. While the damages inflicted on the Lebanese economy have been far from devastating, GDP growth in 2011 fell to less than 2 percent due to the negative ramifications of the Syrian crisis.
Tourism and banks are the two main sectors which have been hit by the turmoil in Syria, although the magnitude of the damage has not yet been calculated by officials and economists in both countries. Lebanon’s exports in 2011 fell by only 1 to 2 percent, a figure that seems manageable. Agriculture has been mostly spared, with the exception of banana exports to Syria.
The Lebanese state has had to allocate resources to cope with an influx of Syrian refugees to the country and the Lebanese Army crackdown on armed smuggling to its neighbor, but these costs have also had a limited impact. But there is concern that the situation may get worse in the coming weeks and months if the United States and some countries in the region move toward more overt intervention. “It is true that the damages on the Lebanese economy have been limited in size, but nevertheless there are some sectors which have been gravely affected by the events in Syria,” economist Ghazi Wazneh told The Daily Star. He added that Lebanon started feeling the impact of the events in Syria in the last months of 2011 and the first two months of 2012.
“When the uprising started in Syria in March last year, the Syrian economy was still performing well, but as the crisis intensified the Arab League and most Western countries started applying tougher economic, trade and monetary penalties on this country, and naturally Lebanon began feeling the effects of the crisis,” Wazneh said.
Most of Lebanon’s agricultural and industrial exports are transported through Syrian territory and only a fraction of these products are shipped by sea and air. All trade routes through Syria have remained open despite a decision by the Syrian authorities to hike taxes on tucks destined for other Arab countries.
As the bloody crackdown on the Syrian opposition intensified since May, the number of tourists traveling by land to Lebanon fell sharply. Tourism Minister Fadi Abboud said the number of tourists to Lebanon fell by 25 percent in 2011. But the sector which has been hardest hit by the crisis in Syria has been Lebanese banks, particularly those that are operating in that country.
Preliminary financial results issued by the affiliates of seven Lebanese banks operating in Syria show that their total assets reached SYP324 billion, or $5.8 billion, at the end of 2011, constituting a decrease of 17.2 percent from end-2010. The decline was due to an average drop of 30.3 percent in the assets of Banque BEMO Saudi Fransi, Bank of Syria & Overseas and Bank Audi Syria, the three largest private commercial banks by assets.
The aggregate shareholders equity of the seven banks reached SYP35.4 billion, or $635 million, at end-2011, constituting an increase of 28.3 percent from end-2010. However, the total net profits of the seven banks reached SYP2 billion or $36.8 million in 2011, constituting an increase of 3.5 percent from 2010.
Wazneh said that Lebanese banks have invested more than $500 million in Syria, and as a result of the depreciation of the Syrian pound in the past few months the value of the investment has declined accordingly. He added that the Syrian pound has depreciated by almost 50 percent and this naturally hurts Lebanese banks operating in Syria. But most Lebanese banks operating in Syria saw their profits rise at the end of 2011, although the growth in net income was lower than in 2010.
All Lebanese bank officials previously interviewed by The Daily Star assured that they have increased their provisions in Syria and Egypt. They also stressed that they have no intention to abandon Syria in the future, despite the political turmoil. But Wazneh feared that Lebanon will suffer both economically and politically if the situation in Syria spirals out of control. “If chaos prevails and the state falls apart in Syria then surely Lebanon will pay a hefty price,” he said. “We are neighbors and naturally will be affected by the events in Syria,” he added.