$1 billion in stimulus
By Central Bank in 2016

To boost credit and channel
excess liquidity into the economy

Governor Riad Salameh said the Central Bank (BDL) would issue a new economic stimulus package in 2016 worth around $1 billion, because the political and security situation in the region is hampering the country’s ability to generate growth.

“This amount could be increased if needed, Salameh said. “We need to stimulate credit because the growth in credit this year is low. There is excess liquidity and we need to channel it into the economy,” he said.

Credit was growing at a rate of three to four percent on an annual basis, while deposits have been growing at six to seven percent this year, according to Salameh.

“Demand for loans is relatively weak, but still there,” said Joe Sarrouh, Executive advisor to the Chairman at Fransabank. “Better economic conditions will be more favorable for lending by next year, due to more political stability expected regionally and locally,” he said.

In 2015, the BDL launched a third stimulus package amounting to $1 billion, coupled with funds revolved from 2014. “The new package may not be absorbed by borrowers in six months, but will be of course consumed with time,” he said.

Previous stimulus packages included lending incentives for housing, education, IT, environment, and renewable energy. “The new package is expected to be limited to these sectors, since they are in most need for liquidity,” said Sarrouh.

Salameh said internal factors had also affected the economy, which he said would record zero to two percent growth this year. “We cannot ignore the political effects on the economy and on the financial markets,” Salameh said, adding that investments and employment opportunities had been hurt by the crisis. But he said the value of the lira against the dollar was a good reflection of market confidence.

“The Central Banks’ role involves monetary policy and improvement of development,” said Sarrouh. “However, the State should move forward in legalization and liberalization of laws that are essential for the growth of the economy,” he said.