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World > Middle East > Lebanon > Economy (Notes)

Lebanon - Economy (Notes)


ECONOMY
Lebanon has a free-market economy and a strong laissez-faire commercial tradition. The Lebanese economy is service-oriented; main growth sectors include banking and tourism. According to the Lebanese Ministry of Economy and Trade, Lebanon posted 5% real growth in 2004, with inflation running at 3%. There are no restrictions on foreign exchange or capital movement, and bank secrecy is strictly enforced. Lebanon has adopted a law to combat money laundering. There are practically no restrictions on foreign investment; however, the investment climate suffers from red tape, corruption, arbitrary licensing decisions, high taxes, tariffs, and fees, archaic legislation, and a lack of adequate protection of intellectual property. There are no country-specific U.S. trade sanctions against Lebanon.

Lebanon embarked on a massive reconstruction program in 1992 to rebuild the country's physical and social infrastructure devastated by both the long civil war (1975-90) and the Israeli occupation of the south (1978-2000). In addition, the delicate social balance and the near-dissolution of central government institutions during the civil war handicapped the state as it sought to capture revenues to fund the recovery effort. Monetary stabilization coupled with high interest rate policies aggravated the debt service burden, leading to a substantial rise in budget deficits. Thus, the government accumulated significant debt, which by 2005 had reached $36 billion, or 185% of GDP. Unemployment is estimated at 18% officially, but in the absence of reliable statistics, some estimate it could be as high as 20-25%.

The government also has maintained a firm commitment to the Lebanese pound, which has been pegged to the dollar since September 1999. The government passed an Investment Development Law as well as laws for the privatization of the telecom and the electricity sector, signed the Euro-Med Partnership Agreement with the European Union (EU) in March 2003, and is working toward accession to the World Trade Organization (WTO). In order to increase revenues, the government introduced a 10% value added tax (VAT) that became applicable in February 2002 and a 5% tax that became applicable in February 2003.

Plagued by mounting indebtedness, Lebanon submitted a comprehensive program on its financing needs at the Paris II donors conference in November 2002 and succeeded in attracting pledges totaling $4.4 billion, including $3.1 billion to support fiscal adjustment and $1.2 billion to support economic development projects. Despite the substantial aid it had received, the government made little progress on its reform program, and by 2006, even before the war, the debt problem had grown worse. After the war, $940 million in relief and early reconstruction aid was pledged to Lebanon August 31, 2006 at a donors conference in Stockholm, and an additional $7.6 billion in assistance for reconstruction and economic stabilization was pledged January 25, 2007 at the International Conference for Support to Lebanon, 'Paris III'. Unlike the Paris II aid, much of the Paris III aid was to be contingent on Lebanon's meeting agreed benchmarks in implementing its proposed five-year economic and social reform program. The International Monetary Fund (IMF) agreed to initiate a Post-Conflict Program and to assign a team to Lebanon to provide technical assistance, to monitor the progress of reforms, and to advise donors on the timing of aid delivery.

The U.S. enjoys a strong exporter position with Lebanon, generally ranking as Lebanon's fifth-largest source of imported goods. More than 160 offices representing U.S. businesses currently operate in Lebanon. Since the lifting of the passport restriction in 1997 (see below), a number of large U.S. companies have opened branch or regional offices, including Microsoft, American Airlines, Coca-Cola, FedEx, UPS, General Electric, Parsons Brinkerhoff, Cisco, Eli Lilly, and Pepsi Cola.


Facts at a Glance: Geography - People - Government - Economy - Communications - Transportation - Military - Climate - Current Time - Ranking Positions
Notes and Commentary: People - Economy - Government and Political Conditions - Historical Highlights - Foreign Relations - Relations with U.S.



Facts at a Glance
Geography
People
Government
Economy
Communications
Transportation
Military
Climate
Current Time
Ranking Positions


Notes and Commentary
People
Economy
Government and Political Conditions
Historical Highlights
Foreign Relations
Relations with U.S.





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