Economic performance

The opening provided in Paris-II Conference (granting Lebanon some US$ 4,3 billion in foreign aid) for dealing with Lebanon's macroeconomic imbalances, has issued a loud sign of the international community's interest in the country and its capability to deal with its fiscal problems and to restore growth to its economy. The government has more over announced the full doze of economic reforms in the 2005 budget, mainly on the public finance front, which aim at reducing public spending and deficit, control the growth of public debt and stimulate additional economic growth. In addition , the 2005-planned reforms aim at rationalizing public sector employment and redefining the role of the State.
On the international level, Lebanon undertook significant measures to enhance its integration in the world economy. Following its membership of the Greater Arab Free Trade Area (GAFTA) in 1997, Lebanon signed an Association Agreement with the EU in early 2002. At the same time, Lebanon advanced towards membership of the World Trade Organization. New trade agreements were signed with international economic partners. This paved the way for further export growth. Exports have been growing at substantial rates in the past few years.
Lebanon has signed, in early 2002, an Association Agreement with the EU which is part of a broader economic partnership and programme of cooperation. The Trade Agreement requires cutting tariff rates down and tariff rates have been brought down in 2000 with more reductions scheduled from year 6 to year 12 of the transition period, with zero-tariffs in most industrial products and many processed agricultural products. In this sense, the Trade Agreement provides for free access of Lebanon's industrial, most agri-industrial as well as a large number of agricultural exports to the European market. It also promotes and encourages greater trade exchanges between both partners, due to the creation of a free trade area.
The Lebanese-European Partnership Agreement also contains an investment component. The European party, based on a sectoral cooperation plan, will help Lebanon with specific investments from its internal agencies. More specific and targeted aid is expected from MEDA II in order to support growth and development in Lebanon.
The partnership agreement will certainly lead to better investment exchanges, mainly via the furthering of exchange of business delegations and mutual investment projects in the two regions.
Lebanon will also benefit from the European advanced technology which is expected to come with European direct investment over the coming years. European direct investment will be a major force driving stronger economic exchanges.
Last but not least, the Partnership Agreement will pave the way for Lebanon to benefit from the European financial aid schemes. This will help the country carry on its economic reforms more efficiently and effectively. On the financial front, the Agreement is expected to develop the banking and financial relations between Lebanon and the EU.

Future prospects

In the meantime, the process of economic reconstruction and development continues, with a major focus on the infrastructure rehabilitation and modernization, including the airport, ports, electricity, water, roads, telecoms and others.
Over the past few years , the Government has been undertaking a set of measures to further the role of the private sector. The government has adopted a comprehensive updating of the trade legislative framework, including WTO-compatible customs law that came into effect in December 2000. This in addition to many trade liberalization measures, including the introduction of the VAT and an open skies policy in late 2000, the liberalization of oil products in early 2002 and the planned liberalization of pharmaceutical imports and elimination of exclusive agencies.
The government is also to adopt a major programme of privatization of public infrastructure over the coming years , mainly in the telecom sector and other key utility companies. Over the past few years, the mobile phone industry was run on a BOT basis.
In the banking sector, the Central Bank has paved the way and is encouraging banks to expand in regional markets. Several big banks have opened branches in markets like Syria, Sudan, Jordan, Algeria and others.
The investment climate in Lebanon is supported by the free economy system coupled with no discrimination between national and foreign investors, and freedom of work and transfer of funds and foreign exchange. The Government has prepared new laws such as the antidumping law and the law on competition. There is also the law on privatization (May 2000) which sets the framework for regulating privatization operations that are actually being prepared and that defines their terms and fields of implementation. The government has established the Investment Development Agency of Lebanon, IDAL, which supports the enrichment of the investment and business environment and facilitates investment opportunities and their implementation. The launching of a wide-based privatization programme in the coming period constitutes by far the major initiative in attracting foreign direct investments, besides local investment. 

The number of tourists visiting Lebanon increased by over a quarter in 2004. A record of 1,28 million tourists indeed visited the country, to be compared with 1,02 million in 2003. Lebanon is thus winning back its reputation as one of the most sought-after destinations in the Middle East. In fact, 2003 was the first time tourist arrivals exceeded the one million mark since 1974.
Lebanon boasts a wide range of attractions, including the Roman remains of Baalbek, historic old coastal towns as well as cultural activities and shopping in its reinvigorated capital Beirut. It is also one of the few countries in the region to offer challenging and reliable skiing opportunities in its mountains.

Basic Economic and Financial Indicators, 1999-2003

Source.: Lebanese authorities and International Monetary Fund

Source.: Ministry of Finance