[Note on the author: Carla Haddad is a senior translator, editor and examiner with the Chartered Institute of Linguists. Carla is currently a student on the City, University of London Writing for Business short course which started in May 2018. She wrote this blog as part of a homework/in-class exercise on that course.]
Amid the gloomy picture of an economy in the red, burdened by large deficits and a hefty public debt-to-GDP ratio, will these factors affect the credit rating outlook for Lebanon in the medium to longer term?
Particularly telling is the impact of economic indicators and political upheavals.
Blighted by skyrocketing prices, consumer demand is stagnating and the inflation rate is on the surge, with purchasing appetite grinding to a halt, mainly due to higher taxation, lower purchasing power and a lack of confidence.
These factors are not only hitting people in underprivileged areas, but also middle class workers who can’t afford to live to decent standards any more, and are compelled to take on a second job.
Similarly, unemployment is hitting its highest level for 10 years, with lower job openings and Lebanese students flocking to nearby oil-rich Gulf countries for work.
The main cause boils down to the infighting in neighbouring Syria. The repercussions from the entailing refugee crisis are by no means helping to kick-start the flailing free-market economy.
Housing prices are another cause for concern, keeping family-starting at bay and paving the way for an ageing population and a dwindling marriage rate. This is especially due to the phenomenon of labour migration amongst men who are usually seen as the bread-winners in a country with such a traditional and conventional way of thinking.
Moreover, political turmoil in neighbouring Syria has wreaked havoc on the growth of the economy, causing it to weaken to the 1-2% range in the last three years, after four years of growth at 8% on average. The political crisis has also jeopardised the country’s already precarious security conditions, with an increasing risk aversion among foreign investors.
Despite the fact that the country has the 19th highest level of gold reserves globally, ranking 2nd behind only Switzerland in terms of gold reserves per capita – holding 287 tonnes as a safe haven in times of economic downturn and austerity – foreign investors are being pushed away by a climate of corruption, complex customs procedures and archaic legislation. [Note: figures quoted are from 2011.]
‘It Could Be Worse’
The overall situation might well cause a downward jolt in Lebanon’s credit rating; but what is heartening is the people’s positive mindset, given the awful times they experienced queueing for bread during the 1975-1990 civil strife.
Especially now that the country is highly coveted for its medical tourism and climate of financial privacy, the ambitious new blood will definitely not shy away from keeping abreast with the latest developments in technology, banking and healthcare services, despite the grim economic prospects.