Lebanon is planning a $1bn economic stimulus package for 2015 to maintain growth and support an economy which has been hit by a three-year conflict in neighboring Syria, the central bank governor said.
Riad Salameh said he hoped the fresh round of stimulus, which follows $800mn in aid this year, will result in economic growth of at least 2% next year. The IMF in May forecast Lebanon’s economy to grow by 2% this year.
Speaking at the Reuters Middle East Investment Summit, he described Lebanon’s financial situation as “solid”, pointing to foreign reserves he said have reached a historic high of over $38bn while gold reserves were at $13bn.
But the war in Syria, a huge influx of refugees and a domestic political stalemate have hit Lebanon’s economy hard, prompting the central bank to introduce a $1.4bn stimulus package in 2013 and $800mn in aid this year.
“The central bank will have another incentive programme of one billion dollars and we will be aggressively engaged in the promotion of knowledge economy,” Salameh said.
“I will recommend to the central council – and there is a positive view towards this – to (issue) a one billion stimulus credit package for 2015 with one per cent interest.” The council is the central bank’s policy-making body.
The stimulus packages have comprised low borrowing rates for housing and new projects, including renewable energy, and extended loan terms for small and medium-sized businesses.
Besides providing housing loans, the new aid will also be allocated to environment and renewable energy projects as well as small projects, Salameh said.
“We hope that growth will occur, as a result of this incentive, that is not less than 2%.”
Lebanon’s economy grew 8% a year between 2007 and 2010, but has been relatively sluggish since the collapse of a unity government and the start of Syria’s uprising in 2011.
Tourism and construction, two mainstays of the economy, have both suffered from Syria’s civil war, in addition to political instability, which has scared off wealthy Gulf Arab tourists and some investors.