BEIRUT: Economists predicted a further downgrade of Lebanon’s sovereign credit rating in 2016, noting that the GDP growth could reach 0.7 percent this year. Economena Analytics, said the key forecast findings are based on the views of 18 leading Lebanese economists, and show growth in 2016 is expected to slow to 0.72 percent.
It said the economic slowdown is mostly a consequence of deterioration in real estate and construction, despite a positive outlook for information technology, manufacturing, transport, retail and public spending.
“Weighing heavily on the economy is the deadlock in policymaking, especially with the expected failure of Parliament to ratify the budget, and Cabinet to approve two critical oil decrees,” the survey said.
But the economists stressed that a president is likely to be elected in 2016 after almost two years of failed attempts to fill the country’s top post.
“Given weakening public finances, particularly amid a widening fiscal deficit and a swelling public debt, eight of the 18 surveyed economists said they expect Lebanon’s sovereign credit ratings to be downgraded,” the report explained.
The report said 12 of 18 surveyed economists said a budget and the oil decrees are unlikely to be passed this year, and none saw a chance for a new salary scale bill to be ratified.
It added that the Parliament has not passed a budget since 2005, a key demand by donor countries, while the oil decrees have been in limbo for over three years.
“The majority of economists had correctly predicted lack of progress on all three issues in the 2015 survey,” the report said.
It added that contrary to the IMF’s forecast of a slight pickup in economic activity to 2.5 percent in 2016, the consensus among Lebanese economists was for a slowdown in output growth to around 0.72 percent.
Seven of the 18 surveyed economists also forecast negative or no growth in 2016, up from 1 in 17 economists in the May 2015 survey.
“The grim outlook didn’t spread to the whole economy. In fact, most sectors are expected to produce positive growth during the year, led by Information Technology, manufacturing, transport, and retail. Even government spending is slated to increase despite forecasts of lower public revenues,” the report said.
Economena Analytics said several manufacturing industries have already successfully overcome domestic and regional risks in 2015.
Exports of pharmaceutical products surged by 45.2 percent to a record $55.5 million in 2015.
“The general trend in exports, however, is likely to remain negative, along with real estate and construction which are seen lagging behind in 2016,” the report said.
It added that tourist arrivals and new car sales will also buck the downward trend in the economy, according to consensus forecasts, while growth in bank loans and deposits will remain high despite an expected decline in remittances.
The survey is in line with the predictions of most international agencies that fear Lebanon’s government will have an uphill task in stimulating the economy and restoring investor confidence.
A version of this article appeared in the print edition of The Daily Star on March 04, 2016, on page 5.