Banks

The Economy

Lebanon's economy and markets are best described at the dawn of the new millennium by a private and liberal economic activity and an openness to abroad with perfect capital and labor mobility. The private sector contributes to around 75% of aggregate demand, a well-diversified sector that covers the totality of economic sectors and is a major pillar for growth and recovery. The Lebanese economy is also a typical open economy with a large banking sector equivalent to more than 2.5 times its economic sector and providing an important support to aggregate demand.

Within this business environment, Lebanon is a country:

- that has today reconstructed its infrastructure, with 80% of the basic infrastructure rehabilitated using the best technologies

- that has revised basically most of its business laws and regulations,

- that has a reputable banking sector with high financial standing, strictly regulated by the Central Bank,

- that has initiated a process of domestic capital market development and accessed frequently international markets,

- and that has recently launched in-depth growth-oriented measures aimed at stimulating the economy.

The newly appointed government launched a series of ambitious measures aimed at improving household and business sentiment and stimulating growth, drawing on a largely underutilized capacity estimated at close to 35% of potential. The expansionary government policies (deregulation, tariff reduction, launch of frozen capital spending, open sky policy, interest rate subsidies for productive lending, etc…) are expected to have a direct positive impact on economic activity, though at the detriment of a tougher fiscal consolidation in the near term.

Indeed, fiscal conditions at year end-2000 continue to be underlined by significant revenue-spending imbalances, leading to further rises in government indebtedness. Deficit reported 24% of GDP in 2000 raising the debt ratio to close to 150%. The country still awaits the...