19 September 2007 BEIRUT: In its latest report for the fourth quarter of 2007, London-based Business Monitor International (BMI) maintained its 2007 real GDP growth forecast for Lebanon at 2 percent. However, the agency, which conducts credit rating and country risk research, believes that this growth is propelled by postwar reconstruction activity rather than a vibrant overall economic situation.

The forecast stems from BMI’s belief that the precariousness of consumer and investor confidence has driven the economy into a state of "just getting by." Nonetheless, the country has huge growth potential, the report said."Positive reforms and the government’s full harnessing of its resources could cause drastic upward revisions in forecasts that could reach 4.5 percent in 2007, since the economy is already coming from a very low base," BMI said in a report published in Bank Audi’s weekly bulletin.

The report indicates that some sectors avoided the impact of domestic economic stagnation, as receipts from exports continued to show positive growth throughout 2007, as a result of the continuous strong demand from the Gulf.About 40 percent of Lebanese exports go to the Middle East, with the UAE accounting for a significant 8 percent, followed by Syria with 7.4 percent, Iraq at 6.8 percent, and Saudi Arabia at 6.3 percent. BMI expects this demand to remain high, given the fact that oil prices are still soaring.

The aforementioned countries are Lebanon’s chief markets for tourism and investment. Therefore, BMI said, once the Lebanese economy exhibits signs of stability, the booming economies in those countries will result in a recovery at the level of gross capital formation, tourism, real estate, and construction in Lebanon.

As for the construction sector, which mirrors longer-term confidence, it has witnessed a slowdown, with the number of construction permits falling by 35.7 percent in the first four months of 2007, relative to the same period of 2006, according to BMI. The report stresses that in theory, this sector should be a key growth area, considering the huge amount of infrastructural work that still needs to be done to fix the damage from the 2006 war. – The Daily Star