Economy of Lebanon

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Lebanon's economy and markets are best described as a developing economy. The private sector contributes to around 75% of aggregate demand, a well-diversified sector that covers the totality of economic sectors and is a major pillar for growth and recovery. The Lebanese economy is also a typical open economy with a large banking sector equivalent to more than 2.5 times its economic sector and providing an important support to aggregate demand.

Lebanon recorded a Human Poverty Index of 7% in the 2009 HDI report which ranks it in the 33rd place in the world. Recently the IMF forecast a growth of 7% for Lebanon's real GDP in 2010 and 2011 following a growth of 9% in 2009 and 8.5% in 2008.[2]

Contents

History

The 1975-90 civil war seriously damaged Lebanon's economic infrastructure, cut national output by half, and all but ended Lebanon's position as a Middle Eastern entrepot and banking hub. Peace has strongly enabled the central government to restore control in Beirut, begin collecting taxes, and regain access to key port and government facilities. As a result, current GDP per capita expanded 353% in the 1990s.[2] Economic recovery has been helped by a financially sound banking system and resilient small- and medium-scale manufacturers, with family remittances, banking services, manufactured and farm exports, and international aid as the main sources of foreign exchange. Lebanon's economy has made impressive gains since the launch of "Horizon 2000," the government's $20 billion reconstruction program in 1993. Real GDP grew 8% in 1994 and 7% in 1995 before Israel's Operation Grapes of Wrath in April 1996 stunted economic activity. Real GDP grew at an average annual rate of less than 3% per year for 1997 and 1998 and only 1% in 1999. During 1992-98, annual inflation fell from more than 100% to 5%, and foreign exchange reserves jumped to more than $6 billion from $1.4 billion. Burgeoning capital inflows have generated foreign payments surpluses, and the Lebanese pound has remained relatively stable. Progress also has been made in rebuilding Lebanon's war-torn physical and financial infrastructure. Solidere, a $2-billion firm, is managing the reconstruction of Beirut's central business district; the stock market reopened in January 1996, and international banks and insurance companies are returning. The government nonetheless faces serious challenges in the economic arena. It has had to fund reconstruction by tapping foreign exchange reserves and boosting borrowing. Reducing the government budget deficit is a major goal of the current government. The gap between rich and poor has widened in the 1990s, resulting in grassroots dissatisfaction over the skewed distribution of the reconstruction's benefits and leading the government to shift its focus from rebuilding infrastructure to improving living conditions.

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