Lebanon's economy needs urgent "surgery" or it could collapse, Prime Minister Saad al-Hariri said on Sunday, and he also said that politicians remained fully united behind reforms agreed on last year, reported Reuters.
After nine months of wrangling over cabinet portfolios, Lebanon’s politicians finally formed a government on 31 January. The heavily-indebted country has said it will enact long-overdue reforms to avoid a worsening of economic, financial and social conditions.
“Today in Lebanon we don’t have time for luxury in politics because our economy could be subjected to collapse, if we do not carry out this surgery quickly and with (political) unanimity,” he told the World Government Summit in Dubai.
Moody's Investors Service indicated that the formation of the new government in Lebanon is credit positive, as it expected the Cabinet to implement the necessary fiscal reforms to unlock the $11bn that the international community pledged to Lebanon at last April's CEDRE (economic conference in support of Lebanon's development and reforms). The five-year package is to be invested in high-growth areas of the economy, such as telecoms and energy.
While the new Lebanese government is expected to implement much-needed consolidation measures to reverse the country’s economic decline, its fiscal position will remain weak, according to Moody’s.
“In the context of very weak growth, fiscal consolidation will remain very challenging for the government,” said Elisa Parisi-Capone, vice-president and senior analyst at Moody’s, in a statement.
Lebanon’s economy has been hit by the war in neighbouring Syria, with annual growth rates falling to between 1% and 2%, compared to 8-10% in the pre-war years. The International Monetary Fund has forecast low economic growth of around 2-2.5% in 2019, up from 1.5% in 2018 and 1.2% in 2017. Lebanon’s public debt, estimated at over 160% of gross domestic product this year, is projected to rise to near 180% by 2023, second only to Japan’s, the IMF says. Despite the challenges, Lebanon has never defaulted on debt payments.