The numerous and drastically varied political interests comprising Lebanon’s government will continue to threaten the pace of reforms, but at least for now, a fully-formed government has allowed Lebanese bond holders a sigh of relief, said Daniel Marc Richards, a Dubai-based MENA economist at bank Emirates NBD.
“While easier said than done, especially in light of the disparate stakeholders represented within the government, the vocal commitment to it is encouraging, and will help stem the growth in Lebanon’s debt levels,” Richards said in a report this week. The bank forecasts Lebanon’s 2019 growth at just 0.9 percent.
While significant challenges to the Lebanese economy remain, “the risk of a crisis appears to have been averted for now,” he said, adding that the country still has reserves equaling roughly 11 months of cash to pay for imported goods. “Reforms are still essential, but Lebanon has been given a stay of execution for now.”
The recent bouts of good news have allayed fears of an economy facing meltdown. At more than 160 percent, Lebanon’s debt to gross domestic product (GDP) is the third-highest in the world, and ratings agency Moody’s in January downgraded its credit rating from “B3” to “Caa1,” on concerns it wouldn’t be able to pay its massive debts. Growth in the country of 6 million is stagnant, dragged down by the influx of some 1.5 million Syrian refugees and increasingly strained and insufficient infrastructure.
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