Growth forecast reduced to less than 1.5 percent

Structural reforms ruled out in the short-term, deficit to widen: reports say

The Economist Intelligence Unit projected economic growth in the country at 1.3 percent in 2011, down from an April forecast of 4.6 percent.

The EIU maintained Lebanon’s growth estimate at 3.6 percent for 2012. It attributed the weak growth outlook for this year to the domestic political unrest in the first half of the year and to the social and political upheaval across the Arab world.

The EIU expected that long-stalled economic reforms will proceed but at a slow pace. It said that privatizing state-owned enterprises will remain a sensitive issue. The EIU indicated that plans to sell the two state-owned mobile phone operators and restructure the heavily subsidized state-owned Electricité du Liban will be deferred beyond 2012.

The EIU forecast the deficit to widen to ten percent of GDP this year from 7.4 percent of GDP last year. It forecast the current account deficit to remain wide and to average 25 percent of GDP in 2011 and 2012.

The EIU voiced concern about the risk of substantial capital flight in the event of a political shock, which could create financing difficulties.

Standard Chartered Bank revised downward its growth projection for Lebanon to 1.5 percent in 2011 from an earlier forecast of three percent. It kept its estimate at five percent for 2012.

According to Standard Chartered, Lebanon's projected growth rate in 2011 would make it the third-slowest growing economy in the MENA region, ahead of Egypt at 1.4 percent and Tunisia at -0.5 percent.

The report forecast Lebanon's inflation rate to reach six percent in 2011 compared to five percent in 2010. It expected the country’s current account deficit to widen to 29 percent of GDP in 2011 from a deficit of 22 percent of GDP in 2010.