Country Report Lebanon April 2013

Update Country Report Lebanon 09 Apr 2013

Early indicators point to another year of weak growth

Event

Lebanon's main economic indicators displayed low levels of activity in the first months of 2013, reflecting the economic impact of the civil war across the border in Syria.

Analysis

The number of people arriving in Lebanon who identified the purpose of their trip as tourism (which indirectly supports around 20% of the economy) fell sharply in January to 81,060, down by 15.4% on the same month of 2012. This followed a 17.5% fall in 2012 as a whole, to 1.37m visitors, a figure well below the 2.17m in 2010 when the political scene was calmer. A survey of the Middle East hotel sector by an international management consultancy found that the average occupancy rate at hotels in Beirut was 49% in January 2013, down from 60% in the same month of 2012. The figure was the second lowest among the 16 regional markets that the survey covers.

Figures for use of Beirut's airport showed growth, with 867,940 people passing through in the first two months of 2013, up by 7.2% on the same period last year. However, rather than indicating increased overall activity, this reflected the shift of traffic in and out of Lebanon's road network, which passes into Syria. Since the start of the Syrian civil war, few visitors have been prepared to use the roads through Syria, which had been a normal route for many Arab visitors into Lebanon.

The construction sector, which is closely linked to tourism, because much of it involves the building of holiday homes for Gulf tourists, continued to witness a sharp decline. Figures for the area of construction approved, an indicator of medium- and long-term confidence in the sector, fell sharply in January to 748,000 sq metres, down by a steep 20.8% year on year. The number of real estate transactions also fell, to 8,547 in the first two months, down by 18.9% on the same period of 2012.

Despite the uncertainty affecting the real economy, Lebanon's financial services industry (which normally accounts for around over one-quarter of GDP) continues to attract inflows of capital, which will help to support services growth overall. Non-resident deposits were up by 11.5% year on year in January, while credit to the private sector continued to record positive growth of around 10% in the same month. Credit to the local economy will be supported by some monetary stimulus introduced by Banque du Liban (the central bank), earlier this year.

Impact on the forecast

These weak figures support our forecast of another year of poor real GDP growth, averaging 1.8% in 2013 (down from 1.7% in 2012).

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