Lebanon Central Bank Statement

Author: | Published: 19 Oct 2018
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The uniqueness of Lebanon has always been in its ability to surmount difficulties. The country was able to confront internal and external challenging circumstances in 2017: GDP growth stood at 2.5%, an improvement on previous years, and the inflation rate was below 4.5%, in line with Banque du Liban (BDL)'s objectives.

At the monetary level, the BDL continued to maintain exchange rate and interest rate stability. The BDL's foreign assets reached a historic record level of around $42 billion in December 2017, asserting stability and confidence in the Lebanese pound. The slight increase in interest rates last year is aligned with the Federal Reserve's normalisation policy and in concurrence with other countries whose currencies are pegged to the US dollar, such as the Gulf Cooperation Council countries. This increase will have a positive impact, attracting remittances and boosting deposits.

Challenging circumstances never inhibited the Lebanese banking sector from flourishing. Its performance remains healthy and all the indicators point towards general progress.

During 2017, total banking activity grew by more than 7.6%, with total assets of banks reaching around $220 billion at end-2017. Customer deposits increased by around 3.4% year-on-year to reach a new high of $178 billion in December 2017. Non-resident deposits continued to grow despite local and regional challenges. Lending activity recorded a 5.78% growth year-on-year to year-end, with total credit to the private sector exceeding $62 billion. The deposit dollarization ratio was around 68.72%, while the loan dollarization ratio continued its downward trend to reach 70.95% at end-2017.

The BDL is devoted to ensuring the soundness of the banking sector and is equally dedicated to promoting economic and social stability. It has taken a leading role in stimulating the Lebanese economy by fostering growth and employment. The BDL has long resorted to unconventional monetary policy tools to spur investment by providing incentives to the private sector offered through banks. These incentives are playing a key role in boosting and supporting the numerous segments of the Lebanese economy.

Moreover, the BDL extended its support to the development of the Knowledge Economy, encouraging the growth of the ecosystem as a whole and steering private equity in that direction. Lebanon now ranks second among 54 world economies in the Entrepreneurship Spirit Index, according to the GEM (Global Entrepreneurship Monitor) annual Global Report 2017/2018. It is also ranked fourth both in Total Early Stage Entrepreneurial Activity and in Entrepreneurial Impact in Innovation, based on the same report.

The outlook for the year 2018 remains positive, supported by the completion of the successful fund-raising conference CEDRE (Conférence économique pour le développement, par les réformes et avec les entreprises) in Paris and the accomplishment of Lebanon's first parliamentary elections in nine years. The Government's commitment to structural reforms will be the needed catalyst for the Lebanese economy to regain momentum and to achieve its potential.