Public Debt grows though defect slows
The latest figures on Lebanon’s gross public debt as Executive went to print, showed an increase of 1.1 percent in January to $51.6 billion, according to Byblos Bank. The figure is a 9.9 percent increase compared to the same period in 2009. Domestic debt also increased some 16.6 percent this year, compared to January 2009, totaling almost $30.4 billion, with foreign debt increasing just 1.5 percent to $21.3 billion over the same period. Local currency debt accounted for 3.4 percent more of the gross public debt than it did at the end of January 2009, at 58.8 percent, signaling a continuing trend toward denominating debt in local currency, which makes it easier for the government to mitigate currency fluctuation concerns. Other promising fiscal signs emerged in January when the fiscal deficit for the month reached $17.7 million compared to the $300 million posted a year earlier. Debt servicing also decreased 26 percent year-on-year to $212.5 million in January, making up 27.6 percent of total expenditures during the month. Lebanon also scored a primary surplus of $201.2 million in January compared to a deficit of $7 million in the same month last year.
Banks propose NDIC buy-out
The Association of Banks in Lebanon have floated the idea of buying the Lebanese government’s share of the partly state-owned National Deposit Insurance Corporation (NDIC) for around half a billion dollars. The NDIC is half government owned, with the other half belonging to commercial banks. In theory, the government is supposed to inject $50 million a year into the corporation but has not paid its dues since 1996, making it liable for some $700 million dollars. The proposal would exempt the government from its dues and result in the banks paying $550 million to acquire the entity this year. The banks will pay the government a further $150 million in the coming two years, while the banks would continue to manage the operations of the NDIC along with the Banque du Liban, Lebanon’s central bank. The proposal would require the law covering the NDIC to be modified or a new law to be passed.
Son of Lebanon tops Forbes rich list
Forbes has released its annual list of the world’s billionaires, 12 of whom were Lebanese or of Lebanese origin. Topping the list with a fortune of $53.5 billion was Mexican Carlos Slim, whose father is Lebanese. Coming in at 64th richest person in the world, worth $10 billion, is Brazilian Joseph Safra, whose family originated from Aleppo, Syria, before moving to Beirut after World War II. The list also showed that Bahaa Hariri, the older brother of Lebanon’s Prime Minister, was $100 million richer than the previous listing with a fortune of $3 billion. Bahaa Hariri was followed by former Prime Minister Najib Mikati and his brother Taha who each had a net worth of $2.5 billion. Lebanon’s Prime Minister Saad Hariri also increased his personal fortune, with an estimated $1.9 billion fortune to his name, up from $1.4 billion in the previous rankings.
Policy quagmire to slow economic potential in 2010
Barclays Capital has indicated that Lebanon’s gross domestic product will likely grow 6 percent in 2010. The investment bank stated that real GDP growth in 2009 was more than 8 percent and attributed the slowdown to a fall in consumption. Barclays also expected a rise in both public and private investment to help spur the economy. The bank expects inflation to hit 4 percent this year on the back of higher oil prices and a possible increase in value added tax. Capital inflows are expected to remain steady while remittances are expected to climb. As such, Barclays expects that the current account deficit will be trimmed from 9.1 percent in 2009 to 8.6 percent in 2010. The banking sector is also expected to do well but will fall relative to last year, with deposit growth projections coming in at 15 percent over the course of 2010 compared to more than 20 percent growth in 2009, according to the bank. Barclays also indicated that the toughest challenges for Lebanon’s economy would be the ability of its policy makers to enact reforms to begin to deal with fiscal problems, which it reckons will see the deficit widen to 11 percent of GDP from around 9 percent last year. It also predicted that the debt-to-GDP ratio would remain constant at 154 percent, due to the lack of reforms at the state-owned Electricité du Liban maintaining its weight on government finances.
Up or down, take you pick of inflation statistics
According to the Consultation and Research Institute (CRI), a private consulting firm, February saw real prices in Lebanon deflate. Throughout the month, the consumer price index (CPI), the premier indicator of inflation, fell 0.26 percent relative to January. However, according to the Central Administration for Statistics (CAS), Lebanon’s official body for the collection of economic data, the CPI in February 2010 rose 0.5 percent relative to January, carried by increases in the price of transportation (14.6 percent), housing (6.1 percent) as well as water, electricity, gas and “other fuels” at 5.5 percent. Yearly inflation also differed widely between the two organizations with CRI estimating that year-on-year prices in February showed an increase of 6.08 percent with a 12-month CPI moving average of 3.17 percent, while the CAS recorded a CPI rise of only 2.9 percent. According to Byblos Bank, 70 percent of Lebanon’s inflation is caused by the increased price of imports.
Energy Ministry plans EDL reform
Figures from the finance ministry have stated that in 2009, Lebanon spent $1.5 billion on the state-owned Electricité du Liban (EDL), with 94.4 percent being spent on fuel oil and natural gas to generate electricity. The total amount of transfers to EDL in 2009 were 7.1 percent lower than in 2008, due to a decrease in both debt servicing (-18.1 percent) and reimbursements (-6.3 percent). Most of the decrease was attributed to a fall in oil prices last year compared to all of 2008. Gas oil expenditure in 2009 increased 26 percent while fuel oil decreased by 1 percent relative to 2008, signaling the beginning of a shift toward cheaper gas-based power generation. EDL expenditures also constituted 20.4 percent of primary government expenditures in 2009, 4.8 percent lower than in 2008. Lebanon’s energy minster has also proposed a 10-point plan to reform the energy sector in Lebanon. The plan proposes providing short-term power solutions to cover for the upcoming summer season when electricity consumption peaks, rehabilitating old power plants in the medium-term, preparing a plan to allow independent producers to generate 5,000 megawatts of power by 2015, diversifying energy resources by shifting to liquid and natural gas plants and employing renewable energy, expanding the energy transport network, improving distribution and collection, installing remote counters and restructuring tariffs. A committee was also formed at the ministry to resolve outstanding issues between EDL and electricity concessionaires.
Tourism sector set for further growth in 2010
The World Travel and Tourism Council (WTTC), a global travel and tourism industry forum, has estimated that tourism in Lebanon will directly contribute 13.3 percent of gross domestic product over the course of this year. The council stated that $4.39 billion in revenue would be generated through tourism, with direct industry employment accounting for some 199,000 jobs and constituting 13.7 percent of total employment in 2010. The WTTC also indicated that indirect contributions to the Lebanese economy coming from tourism would constitute 37.6 percent of economic activity and generate some $12.39 billion. According to the WTTC, Lebanon is currently globally ranked 13th in terms of the share of travel and tourism employment in the country’s job market, but ranks 42nd in terms of expected real employment growth in the sector over the next 10 years. Last month, Lebanon’s tourism minister also stated that the sector would grow by 10 to 20 percent this year, and reassured the public that there would not be a war with Israel.
