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publication April 16, 2018

Lebanon's Economic Outlook - April 2018

Medium-term economic prospects remain sluggish, while macro-financial risks remain high. Projections of annual growth continue to be around 2% over the medium term. In 2018, an expected boost to spending, motivated by the forthcoming parliamentary elections scheduled in May, will be offset by tightened lending provisions imposed by the Central Bank, Banque Du Liban, BdL, as non-performing loan (NPL) ratios are reportedly significantly higher following a reclassification exercise. Moreover, with imports rising further, net exports of goods and services are projected to continue being a drag.

On the fiscal side, the absence of a tax windfall in 2018 and the persistent rise in interest payments on the public debt will widen the fiscal deficit to a projected 8.3% of GDP. Externally, a growing trade deficit along with increasing difficulty in attracting capital inflows are expected to reflect on the foreign exchange position. The November crisis along with more long-term financing challenges and rising FED rates are translating into a tightening of liquidity conditions; average deposit rates on the Lebanese Pound (LBP) and US dollar have increased by 850 and 370 basis points (bps) to reach 6.41% and 3.89%, respectively.

The latest official poverty rate is based on data from 2011-12 and cannot be used for poverty projections due to the substantial structural changes that the country has been undergoing in large part due to the large refugee influx.