No immediate threat
to the local currency

Riad Salameh: “We were not contacted by
any GCC country regarding their deposits”

The Central Bank (BDL) and commercial banks have the necessary means to keep the lira stable, said Governor Riad Salameh. The size of Saudi deposits at the BDL was greatly exaggerated in some press reports, he told Reuters. He said that neither Saudi Arabia nor other Gulf states contacted the Central Bank regarding the deposits. Salameh said that he never heard of any Saudi measures against local economic interests.

Saudi Arabia has not stopped financial transfers to Lebanon, said Mohamed Choucair, Chairman of the Federation of Chambers of Commerce, Industry and Agriculture, dispelling rumors published in the social media. Choucair said he has been told by senior executives in the banking sector that transfers are going through as usual. Exports to Saudi Arabia totaled $357 million in 2015, which represented 12 percent of overall exports.

Half of the $7.5 billion in remittances sent in 2015 are estimated to have come from expatriates in Saudi Arabia.

Nabil Fahed, Vice Chairman of the Chamber of Commerce, Industry and Agriculture in Beirut and Mount Lebanon said: “The economy is integrated to a large extent into the regional economy, and the GCC is a dominant player in the market in terms of volume and value.” The crisis will leave a negative impact on the economy. “It’s not just about the decline in the numbers released by each sector. Limiting the impact of these numbers is trivializing the relation between the countries,” he said. Fahd said: “Trust in Lebanese people will not only drop but also Arab countries will be more cautious in dealing with us.”

“Tourists from the Gulf represent only seven percent of our tenants and the rest are European nationals and locals,” said a source at Le Grey Hotel. He said that this is the case for many hotels which stopped relying on Gulf tourists since 2009. “Arab tourists are mostly from Iraq, Egypt, Jordan, and Syria,” he said.

Joe Yaacoub, Country Manager of Global Blue, the company in charge of VAT refunds, said: “There will be some decline in spending, but not as much as some expect.” Yaacoub said that although Saudi Arabia occupies the top spot among spenders, its share has dropped to 14 percent from 22 percent four years ago. A six percent rise was registered in spending by Egyptians, Jordanians, and Syrians. Last month (January), a 17 percent drop in spending was registered, in comparison with the same period of last year. January normally accounts for 11 percent of yearly VAT refunds.

The deteriorating ties with Gulf Cooperation Council (GCC) countries have been a source of concern for all economic sectors. Saudi Arabia, Qatar, Bahrain, and the United Arab Emirates (UAE) have taken measures to either ban or strongly warn their citizens from visiting Lebanon. The situation is further worsened by a freeze in an aid package of $3 billion to the Army.