The Lebanese economy should grow by three to four percent in 2001, after two years of stagnation, due mainly to a pickup in internal demand and clean up of public spending, the governor of the Lebanese Central Bank, said Thursday.
"There was zero growth in 2000, as in 1999, with inflation also around zero," Banque du Liban Governor Riad Salame said in an interview with AFP.
He said the markets were expecting that growth rate, with "restructuring measures announced by the government aimed at kick starting economic growth through internal consumption and attracting foreign tourists."
He said he did not share the opinion of some leading economists that the economy is in the midst of a recession due to negative growth over three consecutive quarters.
The governor said Lebanon's economic stagnation over the past two years was due to an increase in public debt to around $17 billion, representing 147 percent of gross domestic product (GDP), a budget deficit of 18 percent of GDP and a substantial balance of payments deficit.
The revival of the economy is a top priority of Prime Minister Rafiq Hariri's new government, which has made a sharp cut in excise duties.
Salame said: "The government is hoping to stimulate internal demand" by unblocking savings toward spending, and "external demand by making Lebanon attractive to foreigners."
"Even though it is too early to expect to see the fruits of this plan, it is sure that Lebanon has removed a substantial obstacle in the way of reaching an association agreement with the European Union, which has been discussed for years," he said.
However, Salame added, the government has to start cleaning up public finances and finding an alternative source of revenue to "make up at least part of the loss of customs duties," estimated to be around $300 million.
"I prefer an outright sales tax to value-added tax (VAT), as it is easier to operate in Lebanon, and the government has to find the right moment to introduce it, particularly as it wants to raise expenditure to get reconstruction sites back in action and revive the infrastructure, while increasing credit at better rates for productive sectors and small businesses," he explained.
Lebanon is still rebuilding from its devastating 1975-1990 civil war.
Salame added that the privatization of public services, which was approved in principle by parliament last year, should enable a reduction in public debt. "Servicing the debt will fall, and as a result so will the budget deficit," he said. — (AFP, Beirut)
© Agence France Presse 2001
© 2001 Mena Report (www.menareport.com)
