Thursday 4 June 2009

Is all OK, right?

Yes the economy is fine, says Forbes magazine:

Lebanon has been one of the unlikely success stories of the global financial crisis. The vital tourism and construction industries are booming, and capital is flowing into the country.

As optimistic Lebanese leaders, bankers and businessmen have emphasized, the success is primarily due to conservative bank-lending and bank-investment regulations, limiting exposure to mortgage-backed instruments and other products that have hurt the balance sheets of other international banks, including many Gulf countries.

A result of the country's long experience with perpetual instability in the national and regional political environment, conservative lending policies, backed up by a solid flow of remittances from millions of Lebanese abroad, have immunized the Lebanese economy from political turmoil.

Apart from the months immediately following the 2006 war with Israel, the Lebanese economy has experienced uninterrupted growth since 2001.

Healthy bank sector. A few years back, Lebanon's state regulations were subjected to heavy criticism from domestic and international bankers. Now the financial crisis has turned Lebanese banks into a safe haven in the region, and the economy has thrived:

--Bank deposits have grown steadily, rising 15% in the first three months of the year from the year-earlier period.

--Foreign currency reserves were estimated at 17.6 billion dollars in January 2009, up from 9.8 billion at the end of 2007.

--Foreign liquid assets stood at 22.3 billion at the end of March 2009, a record high.

Impact of the financial crisis. The banking sector's success is remarkable but does not detract from the fact that Lebanon's economy is well integrated into the global economy and will therefore inevitably feel some effects of its downturn in 2009. Private investors have incurred great losses in national and international investments, and the Beirut stock market alone has lost more than $5 billion since mid-2008.

The lack of capital investment will be felt in the crucial construction, telecommunication and service sectors in the medium term, particularly if the crisis continues throughout 2009.


But this optimism hides a slow burning crisis, writes Bassem Chit in Socialist Review:

Rafiq Hariri’s policies since the 1990s have mainly focused on borrowing money and then selling the US$40 billion accumulated debt to local banks with sky-high interest rates. As a result the state is going bankrupt.


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