BEIRUT: Lebanon’s economic growth in the first two months of this year slipped to 4 percent, but the tiny Mediterranean nation should escape largely unscathed from the effects of the global economic meltdown if the security and political situation remains stable, the Central Bank governor said Monday.
But Riad Salameh’s comments to reporters were soon followed three hours later by a bombing that killed a top Palestinian official and three others in southern Lebanon. The incident marked the first apparent assassination in the country in six months, and underscored the difficulty of pinning economic hopes on security in a nation that has endured decades of war and sectarian fighting.
“The Central Bank indicator for economic activity confirms that real growth in the first two month will be 4 percent, and could be more,” Salameh said. “We hope that the political and security conditions remain in this atmosphere so that these expectations be for the whole year not only the first two months.
The rate was far below the roughly 7 percent growth rate Lebanon recorded in 2008, but appeared to exceed expectations.
In January, the country’s finance minister revised growth projections down to 3 percent, from 5 percent, even as officials continued to voice optimism the country will weather the brunt of the crisis, buffered by strict rules that bar local banks from investing in derivatives and foreign home loans
Lebanon’s growth, however, has in many ways been the product of its unfortunate history of conflict. Following each bust cycle from conflict came a boom.
Lebanon has enjoyed a relative calm since rival political groups reached an agreement in Qatar in May. The agreement was followed by the election of a president and the formation of a national unity Cabinet.
Salameh also said that inflation had dropped to 2.6 percent in February, a slide evidenced elsewhere in the Arab world as global commodity prices have begun to decline.
The Central Bank head also downplayed reports that many Lebanese working in the oil-rich Gulf Arab states were losing their jobs as the financial crisis cuts deeply into these nations, prompting layoffs. But he stressed that the country was ready to absorb the expatriate workers if they were to return home.
He also said that while the U.S. government was rolling out plans to buy up to $1 trillion in toxic assets to free up credit, and the International Monetary Fund and World Bank are cautioning that the global crisis will drag on for some time, Lebanon will be able to withstand the downturn.
“Lebanon does not have these problems but should be ready for initiatives to create jobs,” he said.
