Bank of Beirut and the Arab Countries SAL (BBAC) considered in its fourth quarter economic report that overall economic activity in Lebanon declined in 2000 and was aggravated by negative performance in the 4th quarter of all indicators except for a rise in the number of tourists and the value of imports.
It expected real GDP growth not to exceed zero percent and that inflation will be close to zero in 2000. The report indicated that last year was also characterized by a net deterioration in public finances as the overall fiscal deficit formed 23 percent of GDP and gross public debt totaled $24.9 billion, or around 150 percent of GDP.
It noted that the balance of payments registered a deficit of $289.1 million last year despite the net issuance of $1.4 billion in Eurobonds. BBAC attributed the deficit to economic stagnation, an increase in international oil prices, a drop in capital inflows due to political tension, and losses of about one billion dollars by Lebanese investors on the NASDAQ stock exchange.
BBAC said the pro-growth economic policy of the Hariri government aims at transforming
Lebanon into a regional financial and commercial center, and intends to solve the imbalance in public finances in the long-term even if the public debt and deficit rise in the short term.
The report considered that the government must act rapidly on its proposals in order for its strategy to succeed. Such proposals include the creation of a more modern and liberal legal and economic environment, encouraging private initiative, administrative reform, privatization, as
well as maintaining of a stable monetary policy.
Finally, BBAC considered that the 2001 Hariri budget is similar to the original Hoss 2001 budget despite a forecast deficit of 51 percent for the former and 38 percent for the latter. It said the single fundamental difference is the deference of $450 million in revenues from value added tax due to non-implementation of VAT this year.
It noted that the reduction in budgetary receipts due to the cut in tariffs is partly compensated by foreign grants in the new budget, while the higher spending is caused by the incorporation the off-budgetary expenditures of the Hoss budget. — (Lebanon Invest)
© 2001 Mena Report (www.menareport.com)
