World Bank urges release of public budget

Now that a new Lebanese president has been elected, public institutions should assume their proper roles and the government must move forward with the budget, recommended World Bank Director for the Middle East Ferid Belhadj. “What is mostly needed now is a proper functioning of public institutions which will offer some security for citizens and investors while reviving Lebanon’s economy,” he said at a conference Tuesday.

Belhadj said that institutions’ stability is very important at this stage and also the adoption of a budget must take place as soon as possible to restore confidence in the country.

“The World Bank will always support Lebanon to make sure that the country moves forward institutionally and economically by delivering the services that the citizens need,” he said.

His remarks came during a conference held by the World Bank at the Olayan School of Business at AUB to launch the new Lebanon Economic Monitor for the fall 2016. LEM provides an update on key economic developments and policies over the past six months.

World Bank economist Wissam Harake said that the election of a Lebanese president constitutes a very strong signal and the formation of a new government will have a positive impact on Lebanon’s economic outlook.

But, he added, Lebanon still faces massive challenges from the war in Syria including the hosting of the largest number of refugees per capita in the world. “Also, the prolonged political stalemate has left a long list of measures that need to be taken including the parliamentary elections,” he said.

Harake said that the return to potential growth hinges on a resolution of the conflict in Syria as well as a marked improvement in the security and political situation in Lebanon.

Harake said that the World Bank projects real GDP growth to stand at 2.2 percent in 2017 compared to 1.8 percent in 2016.

The World Bank economist gave a few figures about the 2016 economy in Lebanon saying that it had picked up in the first half of 2016. The principle driver for this improvement, according to Harake, was the rebound in construction sector.

“Construction permits grew by 6.6 percent in the first half of 2016 compared to a contraction of 18.9 percent in the same period in 2015,” he said.

Another driver, he added, is the increase in tourist arrivals by 7.7 percent in the first half of 2016 compared to the same period last year.

Harake also added that private lending toward consumption and real estate purchases continued to expand due, in part, to BDL stimulus package in 2015.

As for the external sector, it has contributed negatively to real GDP growth during the first half of 2016. “Merchandise imports recovered from 2015 lows when a sharp decline in oil prices combined with a euro depreciation provided temporary favorable conditions,” according to the report.

It added that merchandise exports have also suffered from road closures through Syria that connected exporters to the lucrative GCC market.

It also said that public investment continues to lag due to political paralysis whereas private investment might improve marginally, driven by a better performing construction sector.

For his part, OSB Associate Professor Ibrahim Jamali focused on the central bank’s intervention in the Lebanese economy.

Jamali said that the goal of BDL’s interventions is to facilitate the access to finance by SMEs in addition to creating job opportunities.

He said that recent surveys showed that around 41.5 percent of Lebanese Micro, Small and Medium Enterprises cite access to finance as an obstacle compared to only 37.5 percent in the MENA region. “Also, access to finance is a more binding constraint for smaller firms and high collateral requirements pose difficulties,” he said.

LEM said that Banque du Liban’s stimulus packages and other initiatives have provided significant support to the real estate sector especially since 2011. It also noted that BDL’s stimulus packages succeeded in closing existing economy wide financing gaps. However, little evidence exists regarding the impact of these packages on economic growth and job creation.

Source: AFP