BEIRUT, 20 January 2005 — Lebanon’s economy grew five percent in 2004, fueled by tourism and investment from other Arab countries, and should register similar growth this year, the central bank governor told AFP in an interview.
The growth in gross domestic product, the highest since 1997, came on top of a healthy three percent expansion in 2003 and was achieved despite political tensions that emerged in the late summer, Riad Salameh said.
“Political tensions partly hit confidence between the end of August and mid-November, especially in the foreign exchange market,” Salameh said. “But this did not stop growth reaching five percent.”
GDP growth to the equivalent of $20 billion in 2004 was due to Arab investment in the country’s property sector and a good tourist season, Salameh said.
He said the confidence of investors was reflected by a 12 percent rise in bank deposits to $58 billion, or nearly three times total GDP.
“The worldwide drop in the dollar exchange rate favored the Lebanese economy, which is strongly dollarized, and the services sector remains the real motor of growth,” he said.
On the negative side, however, inflation picked up from 2.5 percent in 2004 to four percent last year. That stemmed from the fact that Lebanon imports a large proportion of its consumer and capital goods from euro-based countries and the high price of oil in a country that does not produce any.
“Its impact, however, was tempered by monetary stability,” Salameh said.
Another negative factor bearing on the economy is that the already astronomical public debt reached $35.86 billion at the end of the year. To aid the debt-ridden economy, international donors meeting in Paris in November 2002 agreed to lend Lebanon $2.6 billion at preferential rates in exchange for commitments to carry out economic reforms, including privatizations, that have still not happened.
In addition to those loans, the Bank of Lebanon convinced domestic lenders to subscribe to $3.6 billion in Treasury bonds at no interest. These bonds mature in 2005.
