‘Lebanon set to recover from near-zero growth’

By Will Rasmussen , Daily Star

May 25, 2005

BEIRUT: Lebanon is “on the eve of a historic reform opportunity” which could boost foreign investment and shave the public debt to 130 percent of GDP in four years – down from around 180 percent today. A report released by Bank Audi-Saradar said Lebanon’s successful weathering of a rush on foreign reserves, prospects for investment from the Gulf, and Syria’s military withdrawal from Lebanon will help the country recover from near zero-growth in the first quarter of 2005.

Unity among the Lebanese people after the assassination of former Premier Rafik Hariri, the implementation of the Taif Accord, and the upcoming elections “are apt to help restore to the country’s institutions their lost fundamentals weakened by lingering absence of democracy, accountability and credibility,” the bank said.

The outlook for 2005 depends on “drastic political changes in the domestic landscape in the aftermath of the tragic event and their immediate impact on private sector confidence in Lebanon,” the bank said.

Moving forward with long-stalled privatization plans and maintaining unity after the election will be essential for future growth.
Other economists agreed that the end of the Syrian occupation, which some estimates say siphoned tens of billions of dollars from Lebanon’s economy, could clear the way for steady growth and economic reform.

“I believe that the economic benefits Lebanon will reap in the near future as a result of the Syrian withdrawal will outweigh by far the short-term negative economic consequences of the assassination,” said Simon Neaime, chair of the economics department at The American University in Beirut. “The Syrian withdrawal from Lebanon constitutes a major upturn for the Lebanese economy.”

The report said Lebanon’s financial standing remained strong as the Central Bank intervened successfully to defend the pound after the murder.

But other economists warned against over-enthusiasm after a first quarter which paralyzed the economy and scared investors.