Lebanon Financial Report

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Country Report

Lebanon

Generated on February 15th 2014

Economist Intelligence Unit20 Cabot SquareLondon E14 4QWUnited Kingdom

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Lebanon

ForecastHighlights

Outlook for 2014-18 Political stability

Election watch

International relations

Policy trends

Fiscal policy

Monetary policy

International assumptions

Economic growth

Inflation

Exchange rates

External sector

Forecast summary

Data and charts Annual data and forecast

Quarterly data

Monthly data

Annual trends charts

Monthly trends charts

Comparative economic indicators

Summary Basic data

Political structure

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Lebanon 1

Country Report February 2014 www.eiu.com © Economist Intelligence Unit Limited 2014

HighlightsEditor: Edward Bell

Forecast Closing Date: February 5, 2014

Outlook for 2014-18

Lebanon will be politically unstable in the early part of the forecast period as it grapples with the spillover fromSyria's civil war. Political violence will erupt frequently in the major cities, but a return to civil war is unlikely.Debate over the formation of a government will continue, with some sort of compromise between Lebanon'srival political factions likely. But effective policymaking will be constrained by a lack of consensus on majorissues.The economy will grow by an annual average of 3.6% in 2014 18 as private consumption and investment aredampened by concerns over security and political risks. Tourism, a key sector, will in particular be weak.Fiscal reform will be a low priority as policymakers will be preoccupied with the potential for political unrest.We expect the fiscal deficit to narrow in 2014 18 but to remain wide at around 7% of GDP in 2018.Banque du Liban (the central bank) will maintain the Lebanese pound's peg to the US dollar during theforecast period. It will continue to hold a large stock of foreign reserves to meet any downward pressure onthe currency.Inflation will be relatively low during the forecast period. However, there are serious doubts about theaccuracy of government data and whether they reflect current spending patterns.The currentaccount balance will remain in deficit in 2014 18 but will fall from nearly 9% of GDP in 2014 toaround 2% of GDP in 2018. Lebanon is reliant on energy imports and therefore vulnerable to changes ininternational prices.

Review

Political violence is increasing in frequency in Lebanon. Several car bombings have occurred in areas underthe control of Hizbullah, a powerful Shia armed political group.An Islamist militant accused of being part of a group that carried out the November bombing of the Iranianembassy in Beirut died while in military custody. His death, of uncertain causes, raised questions about theinfluence of outside powers in Lebanon's security establishment.Several border towns came under mortar attack from groups operating in Syria. The border regions with Syriaare facing increasing violence as many towns are centres of control for Hizbullah, which opposes the SyrianrebelsThe head of Lebanon's military visited Saudi Arabia to consider financial assistance to his underfunded force.The US$3bn in assistance would help increase Saudi influence in the country.The date of an oil and gas licensing round has been pushed back again, to April, raising doubts over foreignfirms' interest in participating.

Lebanon 2


Outlook for 2014-18

Political stabilityLebanon's political scene will be highly unstable in 2014 15, as the country suffers the spillover effects of the civil warin neighbouring Syria. As the war in Syria hardens into a prolonged conflict, it will occasionally spread into Lebanoneither through direct incursions as rebels fighting against the regime of the Syrian president, Bashar al-Assad, takerefuge in the country or through proxy battles between supporters and opponents of Mr Assad. Parts of Lebanon willbe highly susceptible to violence as a result, although it is more likely to take the form of car or suicide bombingsrather than sustained street battles. The central government will struggle to assert its authority across the entirecountry as several regions are under the sway of a powerful Shia armed political movement, Hizbullah, which is alliedto the Syrian government. The government will call on the military to ensure that it does not lose control of moreterritory, in particular using it to separate clashing factions in the country's second-largest city, Tripoli. The army hascontinued to act as a neutral political force, and its institutional integrity is one of the reasons Lebanon has notdescended into more prolonged sectarian violence. The military will also benefit from external funding from SaudiArabia, which is seeking to maintain some of its influence in Lebanon. However, an overriding risk to all of ourforecasts is the heavy presence of armed groups and Lebanon's history of violence, which means that any dispute,however minor, can escalate quickly and severely.

The credibility of Lebanon's state institutions has been called into question as the country spent much of 2013without a permanent government. In March 2013 Najib Mikati resigned as prime minister owing to a dispute withHizbullah over the appointment of senior state officials. The prime minister-designate, Tammam Salam, an independentSunni member of parliament (MP), has struggled to balance the competing demands of Lebanon's political factions inhis efforts to form a cabinet. Hizbullah, and its "March 8th" allies to a lesser degree, will insist on significant control ofany future cabinet as the organisation seeks to maintain influence over Lebanon's politics. The "March 14th"nationalist political bloc has resisted negotiations with Hizbullah owing to the latter's direct involvement in the Syriancivil war on behalf of the Assad regime. A new government could be formed in February based on a broad coalitionincluding members from both blocs and a sizeable neutral group, perhaps influenced by the president. However, withboth March 8th and March 14th in effect having a veto, the capability of the government to develop truly nationalpolicies will be difficult, as neither side would be prepared to offer substantial concessions.

Sectarian tensions are entrenched in Lebanese politics. By an unwritten national pact, the post of president isreserved for a Maronite Christian, that of prime minister for a Sunni Muslim and that of parliamentary speaker for aShia Muslim. Parliament is divided along confessional lines, with 64 seats each for the Christian and Muslimcommunities, and split further by sect. The division between March 8th and March 14th has replaced, to a degree, thelargely Christian-Sunni-Shia split that predominated during the civil war. Given stronger adherence among Lebanon'scommunities to sectarian rather than national leaders, Lebanon is perennially at risk of de facto political division evenwithout the effects of violence spilling over from Syria.

Aware that its external patrons—Syria and Iran—will be preoccupied with domestic political instability andinternational pressure, Hizbullah is engaging more directly in Lebanese domestic politics. The partial defanging ofSyria as it complies with the dismantling of its chemical-weapons capacity by 2014 will mean that Hizbullah's regionalimportance—by acting as a threat to Israel—will be weakened slightly. Hizbullahcontrolled areas have come underrepeated attacks by militants claiming retaliation for the group's involvement in Syria. There have also been attacks onprimarily Sunni targets in Lebanon that are believed to be directed by Hizbullah. Were the group to mobilise itsfighters to secure its traditional locations of support, it could spark more sustained fighting, particularly in thesuburbs of Beirut and move Lebanon back towards civil war.

Lebanon 3


Election watchThe next parliamentary election will take place in November after MPs were unable to agree on a new electoral law forthe poll scheduled for June 2013. No resolution on a new law has been achieved, suggesting that the debate ahead ofthe election will be intense, with candidates putting little focus on critical issues facing the country, such as fiscalreform or improvements to infrastructure.

A presidential election is scheduled for May. Normally candidates are approved ahead of time by parliament, but therecent hardening of political divisions means that any compromise is unlikely. Despite his protestations that he doesnot wish to extend his tenure, the incumbent, Michel Suleiman, may have his term extended as a compromise. Thiswould spark protest from the leader of the Free Patriotic Movement, Michel Aoun, who has made no secret of hisdesire to fill the post.

International relationsLebanon is firmly embroiled in Syria's civil war, as political tensions in the country have been exacerbated bydifferences over Syria. Hizbullah is actively supporting the Syrian military's efforts, leading to reprisal attacks bySyrian rebel groups on Hizbullah's positions within Lebanon itself.

Lebanon will delicately balance its relations with Arab allies—mainly Saudi Arabia and Qatar—with its relativelyneutral policy towards Syria. However, the government, regardless of its character, will strive to maintain constructiverelationships with the Gulf nations, as their tourists are a key determinant of Lebanon's economic performance.

Israeli attacks on targets inside Syria that are believed to have links with Hizbullah have raised the prospect of arenewed clash with Israel. We do not yet expect a conflict similar to the 2006 war to break out, but occasionalskirmishes or air strikes are possible.

Policy trendsPolicymakers will not make much progress on economic reform, as they will be preoccupied with security in the nearterm. Fiscal reform, particularly the expansion of revenue collection, is vital to the reduction of the structural deficit (aresult largely of the high cost of servicing the massive public debt incurred after the 1975-90 civil war). Some level ofdebt restructuring will be required in order to make servicing costs more manageable (we estimate the public debtstock rose to over 130% of GDP at end-2013), although this is unlikely to happen in the near future.

The development of Lebanon's potential hydrocarbons resources has been held hostage to the political unrest in thecountry. An auction for exploration bids has been repeatedly pushed back as the interim government has not had theauthority to approve the necessary legislation governing the areas to be awarded and a model production-sharingagreement. Indeed, if the political uncertainty continues, international firms will increasingly lose patience with theprocess. Political squabbling over control of the potentially powerful Ministry of Energy and Water will also act as adeterrent for international firms, as there will be the risk of regulatory instability. At present we do not expect anysubstantial investment in the development of oil and gas until at earliest the later years of our forecast period, ifindeed drilling proves that there are commercial deposits.

Banque du Liban (BdL, the central bank) will maintain an accommodative policy stance in order to support theeconomy. In January 2013 the BdL launched a US$1.3bn stimulus programme through the provision of cheap loans tobanks that they can then extend to customers (at interest rates capped at 6%), and in November the governor of thecentral bank confirmed that additional funds would be forthcoming in 2014, albeit at a lower level. The central bankmaintains a policy of holding high levels of foreign reserves—US$37bn (excluding gold) in the third quarter of 2013, oraround 1415 months of import cover—to offset any flight to quality and to maintain the currency's peg.

Lebanon 4


Fiscal policyThe government will run persistent fiscal deficits during the forecast period owing to high debt-servicingrequirements. The shortfalls will gradually narrow from over 11% of GDP in 2014 to around 7% of GDP in 2018 as animproving economy helps to strengthen tax revenue. Perennial political disputes will mean that the passing of budgetswill be delayed in most years and spending will carry on in an ad hoc manner in most ministries.

The government will maintain an active bond issuance programme, both in local and in foreign currency. Much of thegovernment's foreign-currency debt is held by local banks whose appetite for government debt will remain steadyduring the forecast period. The total public debt stock has continued to rise, to over L£95trn (US$63bn) in October2013. However, the government's heavy debt burden soaks up a considerable portion of banks' domestic claims,depriving the economy of a large share of financing.

Monetary policyThe economy's high level of dollarisation and the currency's peg to the US dollar mean that Lebanese pound interestrates tend to track US rates, but with a large positive differential. We expect the central bank to follow the FederalReserve, its US counterpart, in raising rates. Riad Salameh's ongoing governorship of the BdL will help to preserveconfidence in the Lebanese banking system (and also in the solvency of the government). The BdL will expand astimulus programme in 2014 by providing cheap funding to local banks, but we have doubts about overall demand forcredit in the economy at a time of generally weak performance.

International assumptions 2013 2014 2015 2016 2017 2018

Economic growth (%)

US GDP 1.9 2.6 2.4 2.5 2.4 2.6

OECD GDP 1.3 2.3 2.2 2.3 2.3 2.4

World GDP 2.0 2.8 2.9 2.8 2.8 2.9

World trade 2.9 5.2 5.0 5.3 5.4 5.4

Inflation indicators (% unless otherwise indicated)

US CPI 1.5 2.2 2.2 2.3 2.3 2.5

OECD CPI 1.6 2.1 2.2 2.3 2.2 2.1

Manufactures (measured in US$) -3.1 0.0 0.9 1.8 1.9 2.0

Oil (Brent; US$/b) 109.0 104.8 107.3 103.8 97.5 93.0

Non-oil commodities (measured in US$) -6.9 -4.8 2.6 0.5 1.2 2.7

Financial variables

US$ 3-month commercial paper rate (av; %) 0.1 0.1 0.2 1.0 1.9 2.9

US$:€ (av) 1.33 1.28 1.26 1.26 1.27 1.27

¥:US$ 97.61 102.02 103.01 102.00 101.00 100.00

Lebanon 5


Economic growthLebanon's economy will continue to grow at only a moderate pace in 2014 18 as the uncertain domestic political sceneand spillover from Syria's civil war affect investment and private consumption. We expect it to grow by a little over 2%in 2014, up from just over 1% in 2013, although risks are to the downside, given the possibility of the securitysituation deteriorating further. At an annual average of 3.6%, growth in 2014 18 will be well below the historical trendrate, although the economy has previously demonstrated the capacity to bounce back quickly after poor years. Thereason Lebanon will be able to record even these modest levels of growth is that it serves as a hub for goods movingin and out of Syria through both official and unofficial channels.

Investment in Lebanon's hydrocarbons potential will be held up until the political scene is clearer. International firmshave expressed their interest in investing in the country but have also voiced their frustration at the political impassethat is holding up the drafting of necessary legislation for the oil and gas sector.

The economy is highly sensitive to changes in political conditions. Tourism indirectly supports around one-quarter ofjobs and generates much of the demand that supports construction. Banking is vital to the economy and continues tobenefit from strong inflows of deposits and interest income from government debt.

Economic growth% 2013a 2014b 2015b 2016b 2017b 2018b

GDP 1.3 2.2 2.6 3.9 4.7 4.7

Private consumption 2.6 3.3 5.5 7.0 8.0 8.4

Government consumption 4.0 4.5 5.0 4.3 4.3 5.6

Gross fixed investment -2.0 3.5 3.8 5.2 6.0 6.2

Exports of goods & services 3.5 4.5 5.5 7.0 8.0 9.0

Imports of goods & services 3.0 6.5 9.0 10.0 11.2 12.5

Domestic demand 1.6 3.5 4.7 6.0 7.0 7.5

Agriculture 2.0 3.5 4.0 4.5 4.5 3.0

Industry 3.0 4.0 4.0 6.2 6.8 5.0

Services 0.8 1.8 3.5 5.0 5.7 7.0a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts.

InflationLebanon's average inflation rate is estimated to have reached 4.5% in 2013, based on data from the CentralAdministration of Statistics (CAS). However, the CAS did not publish data for the first few months of the year and wehave doubts about the credibility of price reporting. We expect price pressures to be relatively mild in 2014 18, withinflation averaging around 4% as non-oil commodity prices decline slightly early on and post only modest gainsthereafter. Higher minimum wages for public- and private-sector workers will lead to some inflation as merchants passon costs to consumers.

Exchange ratesThe Lebanese pound will remain pegged to the US dollar within a band of L£1,501 1,514:US$1 in 2014 18. The BdL'sfirm commitment to defending the peg is aided by its ability to influence interest rates, a high level of assets andstrong support from local commercial banks. Were Lebanon to experience serious capital flight, it would need to drawdown its foreign reserves to support the pound. Lebanon's reserves (including gold) provide it with an ample 19months of import cover. A risk to the currency, however, is the high proportion of Lebanon's reserves that is held ingold (which the BdL marks to market). Lebanon's regional allies have in the past helped to bolster the country'sreserves during times of political instability, which we expect would occur again if needed in the forecast period.

Lebanon 6


External sectorLebanon will continue to record currentaccount deficits in 2014 18. We have increased our forecast for Lebanon'sexternal shortfalls as the 2013 trade balance has been revised lower; exports, which had held up for much of the year,collapsed in the final months of 2013. We now expect the current-account deficit to shrink gradually from close to 9%of GDP in 2014 to around 2% of GDP in 2018. The trade balance will remain firmly in deficit as Lebanon relies onimports of expensive fuel, raw materials and capital goods. A proposal to shift the country's energy balance away fromfuel oil to relatively cheaper liquefied natural gas would help to alleviate the import bill slightly, but we remainsceptical about whether this will be easily approved at a time of political division. The external balances will benefitslightly from the country's role as a transshipment hub for moving goods into Syria. Any development of Lebanon'shydrocarbons potential would draw in capital inputs, although not until the later years of the forecast period.

The services balance will be the main surplus in Lebanon's external accounts. Tourism from the diaspora has tendednot to be particularly risk-averse, and inflows into Lebanon's banking system continue to grow as investors areattracted by the relatively high rates on offer. Remittances will help to offset the trade deficit. Low returns onLebanon's stock of foreign reserves and high external debt payments will keep the income balance in deficit. Thecurrent-account deficit is normally covered by capital inflows (direct investment from other Arab countries andpurchases of foreign-currency government bonds), although many of these inflows are unrecorded.

Forecast summaryForecast summary(% unless otherwise indicated)

2013a 2014b 2015b 2016b 2017b 2018b

Real GDP growth 1.3 2.2 2.6 3.9 4.7 4.7

Consumer price inflation (av) 4.5 3.9 4.2 4.1 3.9 4.8

Consumer price inflation (end-period) 1.1 3.7 3.9 3.6 2.7 4.8

2-year Treasury bill rate 5.9 6.4 6.5 6.5 6.8 7.0

Government balance (% of GDP) -10.8 -11.2 -9.9 -9.6 -9.3 -7.4

Exports of goods fob (US$ bn) 4.9 5.0 5.2 5.3 5.6 5.9

Imports of goods fob (US$ bn) 20.3 21.3 23.0 25.1 26.8 29.0

Current-account balance (US$ bn) -5.1 -4.3 -4.2 -3.9 -2.4 -1.7

Current-account balance (% of GDP) -11.3 -8.9 -8.0 -6.7 -3.7 -2.3

External debt (year-end; US$ bn) 30.5 32.6 33.5 34.4 31.6 32.4

Exchange rate L£:US$ (av) 1,508c 1,508 1,508 1,508 1,508 1,508

Exchange rate L£:€ (av) 2,002c 1,933 1,899 1,899 1,915 1,918

Exchange rate L£:€ (endperiod) 2,028c 1,892 1,899 1,907 1,907 1,903

Exchange rate L£:¥100 (av) 1,544c 1,478 1,463 1,478 1,493 1,508a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts. c Actual.

Lebanon 7


Data and charts

Annual data and forecast 2009a 2010a 2011a 2012a 2013b 2014c 2015c

GDP

Nominal GDP (US$ m) 34,651 37,124 40,094 42,945 44,888 48,278 52,482

Nominal GDP (L£ bn) 52,236 55,965 60,442 64,740 67,668 72,778 79,117

Real GDP growth (%) 8.5 7.0 3.0 1.4 1.3 2.2 2.6

Expenditure on GDP (% real change)

Private consumption 8.3 5.3 0.4 -1.0 2.6 3.3 5.5

Government consumption 8.6 6.4 3.0 6.9 4.0 4.5 5.0

Gross fixed investment 32.9 6.8 3.0 0.6 -2.0 3.5 3.8

Exports of goods & services 1.7 12.8 -2.3 3.8 3.5 4.5 5.5

Imports of goods & services 20.7 3.1 -3.2 0.3 3.0 6.5 9.0

Population and income

Population (m) 4.2 4.2 4.3b 4.6b 4.9 4.9 5.0

GDP per head (US$ at PPP) 12,914b 13,886b 14,481b 13,898b 13,368 13,829 14,371

Fiscal indicators (% of GDP)

Central government revenue 24.3 22.7 23.3 21.9 20.3 20.7 21.9

Central government expenditure 32.9 30.5 29.1 31.0 31.1 31.9 31.8

Central government balance -8.5 -7.8 -5.8 -9.1 -10.8 -11.2 -9.9

Net public debt 145.6 140.7 133.0 133.4 138.5 139.9 138.6

Prices and financial indicators

Exchange rate L£:US$ (endperiod) 1,507.5 1,507.5 1,507.5 1,507.5 1,507.5a 1,507.5 1,507.5

Exchange rate ¥:L£ (endperiod) 0.062 0.055 0.052 0.058 0.067a 0.068 0.068

Consumer prices (end-period; %) 3.4 4.6 3.1 10.1 1.1 3.7 3.9

Stock of money M1 (% change) 13.4 18.4 7.2 15.7 12.0 12.0 13.5

Stock of money M2 (% change) 37.9 15.4 -1.3 11.0 6.7 12.4 12.2

Lending interest rate (av; %) 9.6 8.3 7.5 7.2 7.4 7.6 8.0

Current account (US$ m)

Trade balance -11,207 -12,499 -13,919 -14,712 -15,339 -16,236 -17,805

Goods: exports fob 4,187 4,689 5,386 5,615 4,941 5,040 5,166

Goods: imports fob -15,394 -17,188 -19,305 -20,327 -20,280 -21,276 -22,971

Services balance 2,867 3,006 6,709 9,991 9,574 11,045 12,638

Primary income balance -228 -509 -174 391 -661 -729 -1,002

Secondary income balance 1,827 2,450 2,525 2,667 1,348 1,633 1,949

Current-account balance -6,741 -7,552 -4,859 -1,663 -5,079 -4,287 -4,220

External debt (US$ m)

Debt stock 25,092 24,707 24,884 29,067 30,529 32,581 33,547

Debt service paid 4,611 4,152 5,327 4,219 4,492 4,528 4,781

Principal repayments 3,096 2,651 3,783 2,681 2,356 2,135 2,235

Interest 1,473 1,450 1,507 1,501 2,137 2,393 2,546

International reserves (US$ m)

Total international reserves 39,165 44,524 48,141 52,498 48,527 50,836 52,098a Actual. b Economist Intelligence Unit estimates. c Economist Intelligence Unit forecasts.Source: IMF, International Financial Statistics.

Lebanon 8


Quarterly data 2012 2013

1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr

Central government finance (L£ bn)

Revenue 3,522 4,120 3,193 3,329 3,354 3,963 3,275 n/a

Expenditure 4,531 4,819 4,589 6,143 4,534 5,646 5,372 n/a

Balance -1,008.7 -699.0-1,396.3-2,813.6-1,179.8-1,682.3 -2,097.1 0.0

Output

Coincident Indicator (end-period, 1993=100) 264.8 261.0 243.5 262.5 273.9 265.5 247.2 n/a

Coincident Indicator (% change, year on year) 4.7 -0.3 -1.9 -1.1 3.4 1.7 1.5 n/a

Financial indicators

Exchange rate L£:US$ (av) 1,507.51,507.5 1,507.5 1,507.5 1,507.5 1,507.5 1,507.5 1,507.5

Exchange rate L£:US$ (endperiod) 1,507.51,507.5 1,507.5 1,507.5 1,507.5 1,507.5 1,507.5 1,507.5

Deposit rate (av; %) 5.8 5.8 5.8 5.8 5.8 5.8 5.8 n/a

Discount rate (end-period; %) 10.0 10.0 10.0 10.0 n/a n/a n/a n/a

Lending rate (av; %) 7.1 7.4 7.3 7.2 7.4 7.5 7.2 n/a

Treasury bill rate (av; %) 4.1 4.4 4.4 4.4 4.4 4.4 4.4 n/a

M1 (endperiod; L£ bn) 6,033 6,288 6,319 7,104 7,038 7,350 7,702 n/a

M1 (% change, year on year) 5.7 8.0 8.9 15.7 16.7 16.9 21.9 n/a

M2 (endperiod; L£ bn) 60,357 61,807 63,024 65,077 65,970 161,425 163,208 n/a

M2 (% change, year on year) 7.8 12.0 10.9 11.0 9.3 161.2 159.0 n/a

BDL financial market value weight stock market index (1998=100) 137.8 123.8 121.8 116.2 119.9 115.9 104.3 103.8

BDL financial market value weight stock market index (% change, year on year) -36.8 -38.0 -26.4 -15.5 -13.0 -6.4 -14.3 -10.7

Sectoral trends

Construction permits (endperiod; ‘000 sq metres) 3,608 3,985 3,228 3,860 2,849 3,463 3,329 n/a

Foreign trade (L£ bn)

Exports fob 1,740 1,535 1,698 1,787 1,797 1,687 1,278 1,173

Imports cif 9,011 7,398 7,766 7,915 8,314 7,962 7,706 8,031

Trade balance -7,271 -5,862 -6,068 -6,128 -6,517 -6,274 -6,428 -6,859

Reserves US$ m)

Reserves excl gold (end-period) 33,939 36,718 36,530 37,186 37,061 38,608 37,190 n/aSource: IMF, International Financial Statistics.

Monthly data Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Exchange rate L£:US$ (av)2011 1,508 1,508 1,508 1,508 1,508 1,508 1,508 1,508 1,508 1,508 1,508 1,508

2012 1,508 1,508 1,508 1,508 1,508 1,508 1,508 1,508 1,508 1,508 1,508 1,508

2013 1,508 1,508 1,508 1,508 1,508 1,508 1,508 1,508 1,508 1,508 1,508 1,508

Central government revenue (L£ bn)2011 1,221 649 858 1,101 1,534 1,823 1,350 885 1,059 1,357 893 1,339

2012 1,507 926 1,089 1,242 1,408 1,470 1,377 885 930 885 930 1,372

2013 861 1,096 n/a 1,543 805 1,007 1,374 1,585 1,005 1,454 924 897

Central government expenditure (L£ bn)2011 1,294 1,404 1,684 1,555 1,258 1,295 1,249 1,153 1,690 1,536 1,551 1,929

2012 1,771 1,199 1,560 1,879 1,483 1,458 1,432 1,368 1,790 1,368 1,790 2,303

2013 2,079 1,761 n/a 1,570 1,227 1,738 2,469 1,756 1,421 1,712 1,755 1,904

Central government balance (L£ bn)2011 -73 -755 -827 -454 276 528 101 -268 -632 -179 -658 -590

2012 -265 -273 -471 -636 -75 12 -54 -483 -859 -859 -931 -1,218

2013 -665 n/a -27 -422 -731 -1,095 -171 -416 -259 -831 -1,007 -345

Gross domestic debt (L£ trn)2011 47.3 46.9 47.8 47.8 48.1 48.0 48.3 48.4 50.3 50.1 49.7 49.3

2012 49.4 49.7 50.5 50.9 51.2 48.5 48.9 49.1 50.1 51.0 51.3 50.2

2013 50.6 50.6 51.0 49.8 50.1 51.1 51.3 51.6 54.3 54.4 55.9 n/a

External public debt (US$ bn)

2011 21.0 21.0 20.9 20.9 20.8 20.7 20.8 21.3 21.0 21.1 21.1 20.9

2012 20.9 21.0 20.6 21.3 21.2 23.1 23.0 23.1 22.9 22.8 23.5 24.4

2013 24.5 24.5 23.9 26.1 26.0 26.1 26.2 26.2 26.4 26.4 26.1 n/a

Total public debt (L£ trn)

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2011 78.9 78.5 79.3 79.3 79.5 79.2 79.6 80.5 82.0 81.8 81.5 80.9

2012 81.0 81.4 81.6 83.0 83.1 83.4 83.6 84.0 84.6 85.4 86.8 87.0

2013 n/a 87.5 87.6 87.1 89.1 89.3 90.5 90.8 91.2 94.1 94.1 95.3

M1 (% change, year on year)

2011 16.3 17.6 14.8 15.7 12.7 12.0 12.4 10.2 7.7 0.9 7.8 7.2

2012 5.0 1.7 5.7 4.9 5.6 8.0 6.2 9.4 8.9 20.1 13.7 15.7

2013 17.1 16.5 16.7 17.1 18.9 16.9 18.1 17.8 21.9 10.8 10.3 n/a

M2 (% change, year on year)

2011 6.8 4.5 2.5 2.1 -0.6 -3.7 -3.9 -3.7 -4.2 -3.6 -2.3 -1.3

2012 5.3 6.6 7.8 8.0 9.5 12.0 11.8 11.5 10.9 11.6 11.1 11.0

2013 10.7 10.5 9.3 8.6 8.4 7.8 7.3 6.7 6.4 5.7 5.6 n/a

Deposit rate (av; %)

2011 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.8 5.9 5.8 5.8 5.9

2012 5.9 5.7 5.8 5.7 5.8 5.8 5.8 5.8 5.7 5.8 5.8 5.8

2013 5.8 5.8 5.8 5.8 5.9 5.8 5.8 5.9 5.8 5.9 5.9 n/a

Lending rate (av; %)

2011 7.7 7.7 7.7 7.7 7.7 7.6 7.3 7.5 7.4 7.3 7.3 7.4

2012 7.2 7.1 7.2 7.5 7.3 7.4 7.2 7.3 7.3 7.3 7.1 7.1

2013 7.3 7.5 7.3 7.3 7.4 7.9 7.1 7.2 7.4 7.6 7.0 n/a

BDL financial market value weight stock market index (1998=100)

2011 226.3 216.5 210.7 209.3 196.7 192.9 183.7 160.2 152.6 142.6 129.4 140.8

2012 136.3 136.5 140.4 131.2 117.8 122.6 130.8 117.7 116.7 113.1 113.0 122.6

2013 122.7 119.9 117.1 126.5 118.2 103.0 104.4 99.7 108.9 103.7 105.6 102.2

BDL financial market value weight stock market index (1998=100) (% change, year on year)

2011 -16.0 -22.6 -29.5 -27.9 -32.0 -28.9 -23.7 -24.6 -29.7 -33.7 -40.0 -35.2

2012 -39.8 -36.9 -33.3 -37.3 -40.1 -36.4 -28.8 -26.5 -23.5 -20.7 -12.7 -12.9

2013 -10.0 -12.1 -16.6 -3.5 0.3 -16.0 -20.2 -15.3 -6.7 -8.3 -6.6 -16.6

Total exports fob (US$ m)

2011 297 304 354 375 377 411 416 363 334 351 347 338

2012 348 429 377 319 355 345 317 339 471 440 364 381

2013 405 381 407 409 364 347 280 280 288 272 263 243

Total imports cif (US$ m)

2011 1,730 1,218 1,632 1,501 1,579 1,572 1,679 1,720 1,780 2,509 1,580 1,665

2012 1,454 2,800 1,723 1,548 1,646 1,713 1,739 1,782 1,630 1,774 1,605 1,872

2013 1,646 1,791 2,077 1,850 1,797 1,634 1,718 1,828 1,565 1,758 1,772 1,797

Trade balance fob-cif (US$ m)

2011 -1,433 -914 -1,278 -1,126 -1,202 -1,161 -1,264 -1,357 -1,446 -2,158 -1,233 -1,328

2012 -1,106 -2,370 -1,346 -1,230 -1,291 -1,368 -1,423 -1,443 -1,159 -1,334 -1,241 -1,490

2013 -1,242 -1,411 -1,670 -1,441 -1,434 -1,288 -1,438 -1,549 -1,277 -1,486 -1,509 -1,554

Foreign-exchange reserves excl gold (US$ m)

2011 31,478 31,301 31,523 31,617 31,067 31,066 31,657 33,493 33,462 33,383 33,679 33,741

2012 33,673 33,794 33,939 34,556 34,425 36,718 36,431 36,700 36,530 36,588 37,121 37,186

2013 37,432 37,292 37,061 38,733 38,190 38,608 37,873 37,586 37,190 37,085 36,941 n/aSources: IMF, International Financial Statistics; Haver Analytics.

Lebanon 10


Annual trends charts

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Monthly trends charts

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Comparative economic indicators

Basic data

Land area

10,452 sq km

Population

4.3m (UN estimate, 2012), excluding around 216,000 Palestinians living in refugee camps

Population in '000 by governorate administration (National Survey of Household Living Conditions, 2004):

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Beirut (capital): 391

Mount Lebanon (Beirut environs): 1,502

North Lebanon: 769

The Beqaa: 471

South Lebanon: 401

Nabatiyeh: 221

Climate

Subtropical; cool in highlands

Weather in Beirut (altitude 34 metres)

Hottest month, August, 2332°C; coldest month, January, 1117°C (average daily minimum and maximum); driestmonths, July and August, 1 mm average rainfall; wettest month, January, 190 mm average rainfall

Languages

Arabic; English and French are widely spoken

Measures

Metric system

Currency

Lebanese pound (L£)

Time

Two hours ahead of GMT (Lebanese summer time is three hours ahead)

Fiscal year

January 1st-December 31st

Public holidays

The dates of Islamic holidays are based on the lunar calendar and are therefore approximate. New Year's Day (January1st); Orthodox Armenian Christmas (January 6th); St Maroun's Day (February 9th); Prophet's birthday (January 13th2014); Easter (April 18th21st 2014); Orthodox Easter (April 18th 21st 2014); Labour Day (May 1st); Martyrs' Day(May 6th); Resistance and Liberation Day (May 25th); Assumption Day (August 15th); Eid al-Fitr (July 28th 2014);All Saints Day (November 1st); Eid al Adha (October 4th 2014); Independence Day (November 22nd); Islamic NewYear (October 25th 2014); Ashoura (November 3rd 2014); Christmas Day (December 25th)

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Political structure

Official name

Republic of Lebanon

Form of state

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Parliamentary republic

Legal system

Based on the 1926 constitution (with amendments incorporated in 1990) and the Civil Procedure Code, the CriminalProcedure Code and the Penal Code

National legislature

Under the electoral law of July 16th 1992, the unicameral National Assembly has 128 seats, equally divided betweenMuslims and Christians

Electoral system

Universal direct suffrage over the age of 21

National elections

The parliamentary election scheduled for June 2013 has been postponed following an extension of the term ofparliament. The election will now take place in November 2014

Head of state

The president must be a Maronite Christian. Michel Suleiman was elected by parliament on May 25th 2008 for a six-year term

National government

The prime minister must be a Sunni Muslim and is chosen by the president after consultation with parliament. Thecabinet is appointed by the prime minister and the president. Ministers need not be part of the National Assembly, butare responsible to it. Cabinet seats are customarily distributed on a sectarian basis. Following the resignation of thecabinet in March 2013, all ministers are holding their positions on a caretaker basis

Main political organisations

Political parties tend to be weak and organised on a sectarian basis. The "March 14th" alliance is headed by theFuture Movement (Sunni) with the Lebanese Forces (Christian) in loose alliance with the Progressive Socialist Party(Druze) and the Phalange (Christian). The "March 8th" bloc comprises Hizbullah (Shia), Amal (Shia) and the FreePatriotic Movement (Christian)

Key ministers

Prime minister-designate: Tammam Salam (Sunni Muslim)

Deputy prime minister: Samir Mokbel (Greek Orthodox Christian)

Culture: Gaby Layoun (Greek Orthodox Christian)

Defence: Fayez Ghosn (Greek Orthodox Christian)

Economy & trade: Nicolas Nahas (Greek Orthodox Christian)

Education: Hassan Diab (Sunni Muslim)

Energy & water: Gebran Bassil (Maronite Christian)

Environment: Nazem Khoury (Maronite)

Finance: Mohammed Safadi (Sunni Muslim)

Foreign affairs: Adnan Mansour (Shia Muslim)

Health: Ali Hassan Khalil (Shia Muslim)

Industry: Freij Sabounjian (Armenian Christian)

Information: Waleed Daouk (Sunni Muslim)

Interior: Marwan Charbel (Maronite Christian)

Justice: Shakib Kortbawi (Maronite Christian)

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Labour: Salim Jreissati (Maronite Christian)

Public works & transportation: Ghazi Aridi (Druze)

Social affairs: Wael Bou Faour (Druze)

Telecommunications: Nicolas Sehnaoui (Catholic Christian)

Tourism: Fadi Abboud (Maronite Christian)

Parliamentary speaker

Nabih Berri (Shia Muslim)

Central bank governor

Riad Salameh (Maronite Christian)

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Documents

Lebanon Financial Report