According to the 2013 Global Competitiveness Report, Lebanon ranked 116th out of 144 in terms of basic requirements, 125th out of 144 in terms of institutions, 135th and 32nd (out of 144) in terms of macroeconomic environment and health/primary education respectively.
The most problematic factors for doing business in Lebanon are:
- Inadequate supply of infrastructure
- Inefficient government bureaucracy
- Government instability/coups
- Policy instability
- Access to financing
- Insufficient capacity to innovate
- Poor work ethic in national labor force
- Inadequately educated workforce
- Restrictive labor regulations
- Poor public health
- Tax regulations
- Tax rates
- Crime and theft
- Foreign currency regulations
You can check out the full report [Here].
Migrants to the United States are responsible for sending almost a quarter of the global total of intentional remittances. While the countries with the biggest flows are Mexico, India and China, Lebanon is in 14th position and sent over 1.5 Billion Dollars in the year 2012.
The map was done by Pew Research Center based on data from the World Bank.
Read the full article [Here].
Rand Ghayad is a Lebanese Economist who will shortly be receiving his Ph.D. in economics from Northeastern University. He published a paper back in 2012, along with his doctoral adviser William Dickens, which offered a new take on long-term unemployment and found that “the long-term unemployed were qualified for jobs but were ranking lower than other potential candidates because of the length of time they had been out of the workforce”.
Rand’s paper was described by the Atlantic Post as “pioneering”, and was cited recently by US Senator Rand Paul, to which Ghayad responded. More importantly, this new theory on unemployment has caught the attention of US president Barack Obama who invited Ghayad to attend a meeting by Gene Sperling, Obama’s National Economics adviser.
For those interested in economics and the topic of unmeployment, here’s a [Link] to Ghayyad and Dickens’ paper, which was originally written for the Federal Reserve Bank of Boston.
As a result of this downgrade, S&P lowered as well the ratings of three Lebanese Banks, Bank Audi SAL–Audi Saradar Group, BankMed s.a.l., and Blom Bank, from B to B-. What S&P is basically telling us is that we need to form a freaking government that is capable of running the country or else we’ll be downgraded further.
It is worth noting though that the decision has no direct impact on the Lebanese banking sector as the banks were downgraded automatically because of the state’s sovereign rating and not their performance.
Standard & Poor’s lowered its long-term foreign and local currency sovereign credit ratings on Lebanon from B to B- keeping a negative outlook, the ratings agency said on Nov 1. S&P kept Lebanon’s short-term ratings at B. Political risk in Lebanon has risen as no new government has been formed for over six months while sectarian tensions are rising, fuelled by the spill-over from Syria, S&P underscored.
After nearly three years of weak GDP growth, dented by an internal political environment not conducive to policymaking, public finances have deteriorated and the debt-to-GDP ratio is again trending upward, S&P said.
The influx of Syrian refugees, which now account for nearly 25% of Lebanon’s population, will strain the country’s resources and public finances while potentially destabilising Lebanon’s demographic balance, S&P warned. But Lebanon’s ratings remain supported by the banking sector, which finances the government’s borrowing requirements. The latter benefit from steady deposit inflows and cash reserves, S&P noted. [Link]
A negative rating action on Lebanon would trigger a similar action on the three banks. S&P could therefore lower the ratings on the three banks further if the political and economic situation deteriorates to the point where it staunches domestic deposit growth or external inflows to the banking system. Both are important sources for funding the government’s fiscal deficits and external requirements, as well as for maintaining confidence in the Lebanese pound’s peg to the dollar.
Conversely, it could revise the outlook on the three banks to stable should there be a breakthrough on the domestic political front.
Owing to the close links between Lebanese banks’ creditworthiness and that of the sovereign, specific factors relating to each of the three banks that would prompt a change in the respective ratings appear limited at this stage. [Link]
Lebanon ranked 111th in the “Ease of Doing Business” 2014 report, way behind the UAE which topped the Arab World and jumped three slots this year to land at No. 23 in the world.
Here are the rankings of all the Arab countries mentioned in the report:
26- Saudi Arabia
What does Doing Business measure and who performs well?
Through its indicators Doing Business measures and tracks changes in the economies that have no regulations in the
area being measured or do not apply their regulations (considered “no practice” economies), penalizing them for lacking appropriate regulation.
The economies ranking highest on the ease of doing business therefore are not those with no regulation but those whose
governments have managed to create a regulatory system that facilitates interactions in the marketplace and protects
important public interests without unnecessarily hindering the development of the private sector—in other words, a regulatory system with strong institutions and low transactions costs (table 1.1). These economies all have both a well-developed private sector and a reasonably efficient regulatory system that has managed to strike a sensible balance between the protections that good rules provide and the need to have a dynamic private sector
unhindered by excessively burdensome regulations.
You can download the full report [Here].
The Mikati and Hariri families alone have 15% of the all the private wealth. Read more about it [Here].
At least 48 percent of Lebanon’s privately-held wealth is concentrated in the hands of some 8,900 citizens — just 0.3 percent of the adult population — according to calculations based on a new report. The nation’s staggering wealth inequality is detailed in Credit Suisse’s Global Wealth Databook 2013, released last week. The distorted wealth figures help to push the country’s Gini coefficient, a measure of inequality, to 86.3 percent — the fourth highest globally behind Russia, Ukraine and Kazakhstan (see chart, below left).*
While Credit Suisse did not directly publish how much wealth is in Lebanese millionaires’ hands, Executive was able to estimate a lower bound based on the report and Forbes magazine’s list of billionaires. Lebanese worth more than $1 million own at least 48 percent of the country’s wealth (see chart above). This figure, however, is a minimum estimate. It also implies that the rest of the country owns less than 52 percent of private wealth, valued at some $91 billion.
The cost of living in Beirut is higher than Dubai yet the local purchasing power in Dubai is 185.86% higher than in Beirut. I looked at the items mentioned in the comparison between the two and they are generally accurate. I would add though to the utilities the generator monthly expenses which are almost twice as much as the electricity bills we pay.
Consumer Prices in Dubai are 6.55% lower than in Beirut
Consumer Prices Including Rent in Dubai are 19.05% higher than in Beirut
Rent Prices in Dubai are 76.17% higher than in Beirut
Restaurant Prices in Dubai are 14.15% lower than in Beirut
Groceries Prices in Dubai are 7.64% higher than in Beirut
Local Purchasing Power in Dubai is 185.86% higher than in Beirut
Children pose for a picture in the Za’atari refugee camp in Jordan. PHOTO BY: Jeff J Mitchell
According to a World Bank report, Syria’s conflict will cost Lebanon $7.5 billion in cumulative economic losses by the end of next year. This number comes as no surprise as businesses are suffering, restaurants and hotels are closing down, tourists are not coming while refugees are flooding the country and unemployment is on the rise.
In terms of numbers, the war in Syria and the resulting wave of refugees:
- Will cut real GDP growth in Lebanon by 2.85 percent a year between 2012 to 2014.
- Widen the deeply indebted nation’s deficit by $2.6 billion.
- Caused an economic loss of more than $1.1 billion in 2012, will cost nearly $2.5 billion this year and up to $3.9 billion next year.
As far as Syrian Refugees are concerned:
- The UN says we have 755,00 refugees while the World Bank estimates their number at 914,000 (Excluding the Syrians who were in Lebanon before the crisis).
- The number is expected to rise to 1.3 million by January and 1.6 million by end of 2014, forming almost 37% of the country’s population.
- 150,000 Syrian children will be expected to register in schools next year, a number that constitutes more than half the number of public school students in Lebanon.
- 40% of primary health care visits were for Syrian refugees last December.
As far as Lebanese and Tourism in Lebanon are concerned:
- Unemployment is expected to double and reach 20 percent.
- Another 170,000 Lebanese (Added to the 1 million Lebanese already classified as poor – living on less than $4 a day) will be pushed into poverty due to the crisis.
- Nbr of visitor arrivals dropped by 43% in the first seven months of 2013 when compared to the same period in 2010.
- Occupancy rates in most of the luxury hotels in Beirut is around 30%.
All numbers were taken from the [Reuters article] and [Executive-Magazine article].
The Lebanese Economy is in a very bad state and will not get better before things cool down in Syria. To make things even worse, unlicensed businesses are being started by Syrian refugees and are threatening the local businesses even more.
Picture from Al-Akhbar
The Economic Committees in Lebanon, which constitute the private sector groups, as well as all the Lebanese banks are closing tomorrow to demand the immediate formation of a Cabinet. Most people I know are happy that they are getting a day off, but few are realizing the gravity of the situation and the importance of this strike.
We hear about employees, teachers, NGOs or syndicates demonstrating and protesting in Lebanon usually, but this time business owners and heads of major corporations and all banks in Lebanon have decided to close down and send a clear message to the officials that Lebanon cannot get out of this economic crisis without a functioning government. Historically speaking, Lebanese banks which are the backbone of the economy, have very rarely, if ever, agreed to join such strikes, so by closing their doors tomorrow, they are raising the alarm on the dwindling Lebanese economy.
“The positive results of banks and reassurances of the Central Bank governor about the Lebanese pound and monetary situation are important … but if things continue on this pace of deterioration … all strengths will be endangered,” he said. “The only difference between Lebanon and these countries is that they found help being European Union members.”
25% of Lebanon’s population are refugees, the touristic season is dead, the economy is bad and above all that we don’t have a government. Let’s hope this strike tomorrow will result in a government of technocrats soon because this is what the country needs at the moment. If no government is formed anytime soon, things only get worse (if that’s even possible).