3.5 percent growth expected for 2012

Standard Chartered warns against potential spillover of regional turmoil

Lebanon’s real GDP growth should reach 3.5 percent in 2012, up from a 1.5 percent GDP growth in 2011, according to a report published by Standard Chartered on March 28.

The report warned, however, that the potential spill over of the turmoil in neighboring countries could present a substantial risk to this scenario.

The report said that a favorable low base effect should support the GDP outlook this year, coupled with an adjustment of confidence considering the new uncertainties. It said that supplementary support to GDP should come from expanded government spending, especially on electricity projects.

The report highlighted the importance of fiscal reform as a priority to reduce the structural deficit. It said that Lebanon can afford tax increases, including a VAT hike to 12 percent, higher withholding tax on interest (to eight percent) and a three percent fee on real-estate sales.

In the tourism sector, the report said that unless there was regional political upheaval, visitors (mostly from Arab states) are expected to return to Lebanon in 2012. It said that recent months have shown a slow improvement in tourist activity after a collapse at the beginning of 2011.

Reported by Hanadi Chami