IMF steers steady
An upswing in the tourism and retail markets will boost Lebanon’s real gross domestic product by 3.5 percent this year, according to an International Monetary Fund statement on February 9. The IMF also predicted that inflation will continue to rise due to the recent increase in minimum wage. In 2011, high public debt (estimated at 134 percent of GDP) and an ongoing current-account deficit caused GDP shrink to 1.5 percent, down from 7 percent growth in 2010. Unrest in Syria continues to be a major risk factor, especially in the short term, since it directly affects banking, consumer confidence, trade and tourism, and thus has banks have reduced their exposure to the country, according to the IMF. There is also a risk of domestic political unrest related to the Special Tribubal for Lebanon, the fund said.
Power and telecommunications were marked as the two most important of the eight major sectors pinpointed for reform, along with other reforms that would enhance the investment climate. The IMF report noted that the “Lebanese Parliament approved in September 2011 a 3-year investment of three percent of GDP to boost Lebanon’s electricity generation by almost half,” which would imply higher subsidies in that sector unless complemented by reforms such as tariff hikes, while noting that Lebanese authorities had acknowledged the World Bank’s vision of “substantial private sector participation” in that field.
Payments balance swings low
Compared to a balance of payments surplus of $3.3 billion in 2010, last year saw a deficit of $2 billion, according to the latest figures from Banque du Liban (BDL), Lebanon’s central bank. The data shows that for the first time in nearly a decade, inflows were not enough to offset the trade deficit. Net foreign assets at commercial banks fell by $4.27 billion while BDL saw net foreign assets increase by $2.27 billion. Lebanese commercial banks saw their net income in the first 11 months of 2011 fall by 10.3 percent compared to the same period of 2010. December 2011 saw a surplus after five months of deficits, though it only reached $692 million as compared to a surplus of $1.2 billion in December 2010. In 2009, the balance of payments surplus reached a peak of $7.9 billion, according to BDL.
Child workers unprotected
Poverty and unemployment were identified as the two main factors leading to the increase in child labour in Lebanon, especially in the North and Bekaa regions, according to two studies conducted by the International Labour Organization (ILO) and the Université Saint Joseph and released in mid-February. The study looked at more than 1,000 child workers from age 5 to 17 years, and interviewed 38 employers in Tripoli, Mina, Beddawi, Akkar and the Bekaa, and found alarming rates of illiteracy and dropout from education. Though Lebanon was one of the first Arab countries to ratify ILO child labour laws starting in 2001, as well as the UN Convention on the Rights of the Child in 1991, Article 7 of the Lebanese Labor Code excludes domestic and agricultural workers, and family-owned businesses from the minimum age requirement. In the Bekaa, where 40 percent of survey respondents were illiterate, most of the children were employed in agricultural or industrial work. In the Northern regions, 33 percent of respondents could not read or write, and in both regions, children left school to work at a median age of 13. ILO Regional Director for the Arab States Nada al-Nashif said in a press release that laws need to be enforced and minimum working age lifted to 15, or 18 for hazardous work, instead of adding more laws to the already fragmented legal system. The average weekly salary was quoted as LL 51,740 ($34.50) in the North and LL 50,000 ($33.3) in the Bekaa.
Delayed accuracy
The time honoured tradition of releasing GDP figures long after they would have been useful for short-term analysis was upheld by the government last month when it released Lebanon’s 2010 National Accounts, the breakdown figures for GDP calculation. The release showed that real GDP growth for that year hit the expected 7 percent mark. Construction and market services lead the growth with rises of 18.5 percent and 9.2 percent respectively in terms of volume. The only sector which experienced a contraction was the trade sector which registered a decrease in volume of 0.8 percent.
Electronic media law update
On the status of the draft law concerning electronic media, Minister of Information Walid Daouk gave Executive an update about its status and that of the more specific code on electronic media. “The general code on media might take a long time so the small chapter concerning electronic media should be done separately…I hope it comes up in parliament soon,” said the minister, who worked with Member of Parliament Ghassan Mokheiber and presented it to the Media and Information Committee in Parliament. “I am screening and requesting different parties to give their point of view… but no one is obstructing it,” said the minister. The electronic media law has two pillars, the minister explained. Each website has to be identified by a responsible director and have an address. Also, the content of the website should be protected under the intellectual property law. “As of end of November, we have 120 political websites, which by now are up to 250. This is why we should regulate them and all websites in terms of freedom of speech and respect of intellectual property rights.” Though the committee preparing a general media code for the last two years (Lebanon’s print media code dates back to 1962), he said “We cannot wait for electronic media to be included in the larger media law, which will take a long time. I have personally experienced [the delay in] the stock exchange code which was prepared in 1998 and didn’t get approved until last year,” he said, referring to the capital market law approved by parliament in August 2011.
Raising revenue, passing budgets
Finance Minister Mohamad Safadi announced last month that the deficit in the 2012 budget should not exceed $3.48 billion (round 9.2 percent of estimated GDP) when counting in the recent wage hike decree approved (in part) by the cabinet. The wage hike itself will cost the government some $800 million. The finance minister also stated to Al Akhbar that Value Added Tax will likely increase by one percent to 11 percent, instead of the previously proposed 12 percent and taxes on interest earned from deposits would be raised from 5 percent to 8 percent. The VAT increase is intended to increase revenues by $232 million and the increase on interest another $265 million. Similarly, Prime Minister Najib Mikati has proposed new measures to the 2012 draft budget in an effort to break a six-year stint whereby the Lebanese government has not managed to pass a budget. Under the proposal he contradicted the finance minister’s previous statements by saying he looks to place a ceiling on the ratio of the deficit-to-GDP at five percent and reduce the debt-to-GDP ratio (currently at an estimated 134 percent) to 100 percent in the next five years. The premier also stated that the objective of the government should not be to just reduce the cost of debt servicing but also address the principle on the debt through a review of public expenditures, taxation policy (including collection), public private partnerships and even some form of privatization. Mikati also re-stated his previous intention to use the proceeds from any future oil and gas revenues to reduce the debt stock to 60 percent of GDP. He also proposed a law to allow parliament to approve the 2012 budget before addressing the fact that around $11 billion in public finances remain technically unaccounted for. Lebanon’s constitutional deadline for passing an annual budget expired at the end of January.
