Economy to remain slow

Non-oil exporting countries in the region, including Lebanon, may experience weakened growth prospects in 2015, partially due to the negative repercussions of armed conflicts in neighboring countries, according to the United Nations World Economic Situation and Prospects 2015 (WESP) report.

Lebanon is experiencing a pace of economic expansion insufficient to accommodate the large influx of refugees from conflict countries in the region, the report said. GDP growth is estimated to have accelerated in 2014 to 1.8 percent, driven mainly by strong growth in construction and government spending.

“These prospects of economic slowdown are right as long as the political and security situation does not improve,” said Marwan Mikhael, Head of Research at Blominvest Bank. “Lebanon is far away from registering high growth between five to six percent, if the tourism and real estate sector, engines of growth between 2007 and 2010, do not recover,” he said.

The continuing influx of Syrian refugees overburdened the economic infrastructures of Lebanon like in Jordan and Turkey.

The report said that labor nationalization in GCC countries is expected to continue at various levels, which may have negative effects on job seekers from Lebanon.

A prudent fiscal policy environment will continue in Lebanon, where rising government debt is pressuring fiscal balances due to higher interest payments, according to the report. The country relies more on foreign aid to carry out public investments.

The current account deficits are estimated to edge up in Lebanon, Jordan, and Yemen in 2015, mainly owing to a deterioration of exports. In part, the external accounts of Lebanon have been affected by the conflict in Iraq, the report said. In 2013, Iraq was the fourth export destination for Lebanon. The loss of export earnings to Lebanon from the Iraqi market in 2014 is estimated to have reached $110 million.

“Economic and political relationships between Lebanon and Iraq are strong and we rely on more stability in that country to compensate for any losses,” said Wajih Bizri, President of the International Chamber of Commerce - Lebanon. “No solutions are provided to solve trade problems by the State, but some traders are trying to export to Iraq through Turkey or by sea through Aqaba in Jordan,” he said.

Current transfers, including remittances and foreign aid, partly offset trade balance deficits in non-oil-exporting countries. Despite lower energy and food prices during the forecast period, the report expects that current account balances will remain large.