High hopes of Lebanon making an early return to a commanding place in the regional, commercial and financial life are waning
The Lebanese economic miracle is faltering, with the country's economic growth rate expected to dip below four per cent this year. However, a new World Bank report suggests that the government's recovery programme has already accomplished its major tasks: rehabilitating the war-ravaged Lebanese economy, and restoring the country's reputation as a Middle East business centre. The challenge now is whether the government can put the country back on the fast track.
After the stunning successes of the early 1990s, the Lebanese government seems unable to sustain the high growth rates that allowed the country to emerge so quickly from the ravages of civil war. It must now walk a delicate line, striving for fiscal austerity to boost its credit ratings and attract foreign investment, while priming the pump to maintain domestic economic growth.
In a report issued earlier this summer, the International Monetary Fund warned that "the main challenge in the years to come is to ensure the sustainability of the success in reconstruction and the stabilisation of the economy."
The IMF report, aptly titled Back to the Future, points out that the first phase of the country's Horizon 2000 recovery programme, launched in 1993, is now nearing completion. Basic infrastructure has been reconstructed throughout the country.
But much work remains to be done, if Lebanon is to realise its goal of resuming a commanding place in Middle East commercial and financial life. Moreover, continued economic stabilisation and structural reform of the national budget are vital if the country is to enter into the long-sought Association Agreement with the European Union.
But there are now pressures growing on the government to stimulate the economy, to raise growth rates and help reduce the estimated 20 per cent unemployment level. Such moves could upset the disciplined efforts to reconstruct the national economy.
Parliamentary debate delayed passage of this year's budget by seven months, even though the ruling coalition controls almost two-thirds of the seats in parliament.
A stalled recovery 1993 1995 1997 1999 (est.) GDP ($b) 7.53 11.21 14.86 15.75 GDP growth (%) 7.0 6.5 4.0 3.5 Inflation (%) 24.7 10.6 7.7 6.5 Trade ($m) Exports 684 816 642 650 Imports 4,908 6,722 6,897 7,100 Equity Market capitalisation ($m) n/a 400 2,904 3,500 Sources: Banque de Liban...