What will
happen in 2015?

Positive growth, expansion plans,
and projects to be completed

The coming year will be challenging for the economy. The political impasse and spillovers from the Syrian conflict will be key factors in influencing the growth of the Gross Domestic Product (GDP). The government’s overall deficit is forecast to widen to 11 percent of the GDP in 2015, compared to ten percent in 2014, according to World Bank estimates. The current account deficit is forecast to reach eight percent in 2015, down from 8.3 percent in 2014, in line with the previous three years. Debt is expected to rise, especially if the government does not adjust spending.

The decrease in oil prices will decrease the budget deficit. The Treasury suffers from an annual deficit related to the Electricité du Liban (EDL) estimated at $2 billion. The economy will take a boost through the Central Bank (BDL) new stimulus package for 2015. “BDL’s incentive packages go beyond subsidized loans. They helped to stimulate economic growth by between 1.5 to 2 percent in 2012 and 2013,” said Joe Sarrouh, Advisor to the Chairman at Fransabank. “Growth may be between 2 to 2.5 percent in 2015, in the light of BDL’s $1 billion package and remaining liquidity from previous packages,” he said.

The performance at the Beirut Stock Exchange (BSE) in 2015 is subject to high correlation between the local and regional political environments and traders’ appetites. “Prices of stocks are cheap, but the trading volume will remain weak since the market won’t be able to attract investors in case of further local political conflicts and repercussions of geopolitical risks regionally,” said Tareck Farah, Chairman of Mena Invest. “No major developments are expected in the market, unless the country is released from its concerns,” he said.

The banking sector will remain stable. The sector’s strong performance will be mainly driven by the growth of deposits, according to Marwan Barakat, Head of Research at Bank Audi. Barakat expects deposits to grow by $8.5 billion in 2015. “This boost corresponds to a six percent growth, which is still higher than the growth needed to finance the domestic economy in its public and private sector components,” he said.

Banks will have room to benefit from BDL’s $1 billion stimulus package. Banks, as well as private equity and venture capital firms, are expected to be more involved in the investment of startups through BDL’s circular 331. Economist Marwan Iskandar expects “banks’ deposits may be negatively affected by the impact of lower oil prices on expat remittances, mainly from the GCC countries.” Barakat expects that banks “will face pressure on profitability in 2015, within the context of a low interest rate environment and weak economic growth.”

Real estate activity is expected to remain timid in 2015. Samer Bissat, Member of the Real Estate Developers Association (REDAL) and Senior Project Director at Majid Al Futtaim Properties said: “2015 will resemble last year in sales activity unless the political situation changes dramatically.” Close to 500 residential buildings, representing more than 11,000 apartments will be delivered in 2015, according to InfoPro’s semiannual Properties study. BDL’s stimulus package will nurture the trend of small apartments, according to Massad Fares, Chairman of REDAL. “A new trend will be more widespread is the renovation of old apartments,” he said.

Despite deceiving tourism figures, investments in the tourism sector will thrive in 2015. More hotels are expected to launch operations. Four resorts will be added to the map, while restaurants and many franchises are expanding. According to Nada Sardouk, Director General of the Ministry of Tourism, many investors still believe in the capabilities of the hospitality and tourism sector.

Malls and supermarket chains will be dynamic in 2015. International and regional chains are promising, with more than five new branches to open. The mall fever has reached the South with two new developments expected to boost the retail scene there.

In the media sector, Ghaleb Kandil, Member of the National Media Council said: “We live in the era of interactivity and more initiatives will be launched in this direction.” A growing number of web-based TV channels and portals are being launched, announcing an era of interactivity and fast broadcast of information.

Local farmers will continue filling the gap left by the Syrian conflict. Ramez Osseiran, Head of the Lebanese Farmers’ Association in the South said: “Agricultural exporters will be searching for new markets.” The private sector, in coordination with the government, is working to penetrate the Russian market by exporting fruits and vegetables.

Several factories will begin operating and a number of industrial companies will expand their facilities in 2015. More than 50 factories will receive ISO certifications, according to the Ministry of Industry. Industrialists will benefit from lower oil prices to reduce energy costs. They will also focus on penetrating new markets, like Russia. “There is big potential, but we should work hard on this issue,” said Mounir Bissat, Head of the Council for Industrial Export Development at the Association of Lebanese Industrialists.

Public works are forecast to pick up in 2015. Many infrastructure projects are expected to be completed, including roads, seaports, air terminals, as well as many wind and solar projects. Maroun Helou, General Manager of Abniah contracting firm, said: “The market is an active hub for efficient architects and engineers; we have competent labor and the Central Bank is supportive; we are cautiously optimistic that contractors will do just fine.”

Sleiman Haroun, chairman of the Syndicate of Private Hospitals said: “Hospitals will invest more in developing medical equipment to enhance the quality of services.” Around 400 new public and private beds will be available for patients in 2015.

Local products will be exhibited in global exhibitions in 2015, to increase industrial and agricultural exports and penetrate new markets. Exhibitions include Dubai International Village, Surajkund Mela Exhibition in India, and Lebanese Wine Day in New York.