Lebanon Central Bank Statement

Author: | Published: 5 Sep 2017
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The past few years have strained the Lebanese economy with political tensions, security challenges, and regional unrest, caused particularly by the spill over risks from the Syrian crisis. The situation was also exacerbated by the political paralysis which kept the country without a president for more than two years. As a result, the main economic indicators, namely foreign trade, tourism, investment and consumption, have decreased since 2011. Despite these challenges, confidence in the economy and in the Lebanese pound remains strong, with real GDP growth of around 2% and inflation close to 0% in 2016.

The financial engineering launched by Banque du Liban (BDL) between May and August 2016 has had a positive impact on both the monetary and banking fronts. The year 2016 ended with a surplus in the balance of payments (BOP) and a record level in BDL's foreign assets which confers stability to the Lebanese pound and interest rates.

On the banking front, customer deposits resumed their growth after the financial engineering, reaching a new high of $174 billion in March 2017. Total banking activity grew by more than 9% on an annual basis, with total assets of banks exceeding $205 billion in March 2017. The banking sector's high levels of liquidity enable banks to finance the government and private sector needs while maintaining a stable interest rate structure. In terms of capitalisation, banks' capital base reached $18.5 billion in March 2017, with an annual growth rate of 9%, which enables banks to comply with the new international capital, risk and International Financial Reporting Standards (IFRS) requirements.

On a more macroeconomic outlook, inclusive growth and job creation are at the heart of unlocking Lebanon's potential. On the one hand, and given the tangible results of the first stimulus package in 2013, the BDL renewed this stimulus for the fourth consecutive year, with an average of $1 billion per year. These credit incentives, provided through the banking sector, have played a key role in boosting and supporting the numerous segments of the Lebanese economy. The BDL has also placed more focus on further developing the knowledge economy sector. It has increased the margin of funds that banks could dedicate to the financing of this sector, by authorising them to invest, with BDL's guarantee, up to 4% of their own funds, compared to 3% previously. In three years, 800 companies have been created and several funds are investing in this promising sector.

The policies undertaken by BDL have proven to be major drivers of the Lebanese economy. Lebanon now has the basis for a better growth, owing to the political stability achieved through the election of President Michel Aoun and the formation of the Government of Prime Minister Hariri. However, optimism will not be able to take full effect unless it is coupled with the appropriate structural reforms.




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