Barring the possibility of regional instability, the Lebanese economy could growth of three percent and more during 2001, said Riad Salameh, the governor of the country’s central bank, in conversation with the Khaleej Times.
In contrast, growth in DDP for 200 is expected to zero percent, down from one percent in 1999 and two percent in 1998.
Factors that could contribute to this improved economic outlook, Salameh said, reduced customs duties on most imported products and liberalized air travel in and out of the country. The government is also expected to reduce employers' contributions to the National Social Security Fund.
But at the same time, Salameh rejected call by the business community to cut interest rates, explaining that he did not believe that the market was ready yet for such a move. With a public debt of more than $22 billion and the government forecasting a budget deficit of almost 51 percent of spending next year, he said, any hasty cuts in Lebanese-pound interest rates may encourage investors to shift their deposits into dollars or out of the country.
Salameh also struck down suggestions that the Lebanese pound be devalued to reduce the local-currency debt burden. A devaluation of the pound would cause interest rates to go even higher, he stated.
At the same time Salameh discounted a report by Merrill Lynch that warned its clients that the Lebanese pound faced a real risk of devaluation in 2001, pointing out that if the report was accurate, then investors already would have left Lebanon.
Salameh said that he was not particularly worried by the fall in the central bank's foreign-currency reserves, and said he expected the reserves to climb soon after the government issued new eurobonds. – (Albawaba-MEBG)
© 2000 Mena Report (www.menareport.com)
