Our small, dependent economy

by Jad Chaaban February 20, 2015

written by Jad Chaaban February 20, 2015

Lebanon is a small dependent economy, built on a quasi-complete consumerist system where we import more than 80 percent of our energy, food and most consumed products and services. The country also relies on financial inflows to finance its public debt and domestic consumption, with foreign inflows per year into the Lebanese economy reaching more than 50 percent of gross domestic product in the past few years. As a result, we now have an oversized banking sector, with the consolidated balance sheet of commercial banks in the country growing from 188 percent of GDP in 1997 to 360 percent of GDP in 2013. Where does all this money coming into Lebanon originate? Remittances from emigrants largely finance domestic consumption. With petrodollars and remittance income increasingly available (but not for long, given the recent fall in oil prices), Lebanon has become extremely reliant on this abundant source of capital. This dependency

economy Lebanese Economy

Jad Chaaban

Jad Chaaban is a French/Lebanese economist and public policy expert with over 15 years of academic and professional experience. He was an associate professor and Assistant Dean at the American University of Beirut, and has held positions at INSEAD, Paris-Dauphine PSL University, LSE, and Toulouse School of Economics. He has worked as an economist for the World Bank and as a consultant for various UN agencies. Dr. Chaaban holds a PhD in Economics and an MBA, and his research focuses on development economics and public policy. He is multilingual and has secured nearly $4 million in extramural funding for international research projects.

2 comments

Rudy Sassine February 24, 2015 - 3:49 PM

I concur on this with Dr. Chaaban. Even during the boom years of 2006-2010, the outpouring of foreign capital was limited in large part to the non-tradable sectors of real estate, construction and tourism, and it crowded out investments in the other productive sectors. This system that keeps our economy afloat even during times of insecurity is proving insidious; it doesn’t expose our deficiencies so plainly to push us to take the needed structural reforms in the investment and business framework.

Kamal February 25, 2015 - 12:43 PM

Good article Jad. Would have been great to add the numbers with the central bank balance sheet and the government current account balance. With the actual oil price crisis, I think the impact on the next 2 years can be predicted so to show the negative trend the country is facing ahead.

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Our small, dependent economy

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2 comments