The dangers of stimulus

Subsidies are always tricky and generally dangerous. Benefits are impossible to predict with certainty and unintended consequences range from valuation bubbles and boosts of inflation to loss of competitiveness. Governments are well advised to use subsidies sparingly. Beyond the usual and long standing subsidies that aim at serving the disenfranchised and the needy (such as those on bread, certain social and medical services, and tobacco), subsidies are currently being used in Lebanon for propping up the economy. They are targeted, provided and supervised by the central bank. Known as ‘the stimulus package’, they are focused on the housing sector more than anything else. [pullquote]Subsidies are always tricky and generally dangerous[/pullquote] Some did raise questions about the wisdom of the initiative. After the first year of this stimulus when a nominal value of $1.47 billion in 2013 was extended into an $800 million second round for 2014, Executive opined that it