No economic crisis
according to Central Bank

Riad Salameh praises resilience
and will enhance BDL lending policy

The Central Bank (BDL) said the country was not in an economic crisis because negative growth had been avoided and the monetary position remains strong. The country is expected to record zero percent growth this year as per BDL projections, down from an average of two percent through previous estimates. BDL reviewed its growth prospects due to political conflicts and security uncertainty that are weighing heavily on the economy.

“Given the situation in the Middle East, Lebanon is showing a lot of resilience, especially on the monetary side,” said Governor Riad Salameh to Reuters in an interview earlier this week.

Bank deposits are up by six percent this year and expected to reach close to $160 billion by the end of December, said Salameh, citing confidence in the country’s banking sector. Remittances will be steady at around $7.5 billion this year, or 20 percent of Gross Domestic Product (GDP), despite lower global oil prices, which affect Lebanese working in Gulf oil-producing countries, he said, citing World Bank estimates.

Some international institutions share BDL’s confidence in the economy. According to the Regional Economic Outlook: Middle East and Central Asia report, issued by the International Monetary Fund recently, the GDP is expected to grow by two percent and 2.5 percent in 2015 and 2016, respectively. Inflation will hover between 0.1 percent and 1.5 percent during the same period. Credit to the private sector will remain strong, although lower than last year, growing by 8.7 percent in 2015 compared to 9.3 percent in 2014. The percentage of Non Performing Loans of total loans was only at four percent in 2014.

Growth is likely to remain at around two percent this year, unchanged from last year’s pace, according to the World Bank’s MENA Economic Monitor report issued recently. Growth has been driven by a resurgent tourism sector and robust private lending as BDL renewed its stimulus package in the amount of $1 billion this year, the report said.

As for BDL’s strategy, Salameh said it will compile a new stimulus package worth up to $1.5 billion in 2016 to help boost credit, which grew by around five percent this year, lower than the average.

BDL is keeping interest rates stable after lowering them at the start of the year, Salameh said. “We have no intention of increasing rates. On the contrary, we will intervene to maintain rates around this equilibrium point we see today in the market,” he said, adding that a decrease would not be possible unless there was a major change in the political climate.

Salameh said it is essential that Parliament meets soon to pass laws for development loans, debt issuance and banks. He urged politicians to break political deadlock harming the economy.