Lebanon meets the challenge of a bad year.


Most of what happened to the economy of Lebanon in 2005 happened as the result of political turmoil. The major event was the assassination of the country's premier in February 2005. An international consensus quickly emerged that the government of Syria was to blame, and the country's occupation of Lebanon soon after ended in April 2005.

A 15-year civil war (ending in 1991) ruined the country's infrastructure. The struggling government is burdened with debt, and many promised economic reforms have not been implemented.

According to a December 22, 2005 Agence France-Presse (AFP) story that appeared in The Daily Star (Beirut), the economy will show zero growth for 2005. Some idea of how critical this loss is can be gauged from the International Monetary Fund's (IMF) prediction (April 2005) that Lebanon's GDP would increase by 4 percent in 2005. In an October 28, 2005 review of Lebanon's economy, the IMF revised its earlier prediction downward to zero growth as well.

More important for the future is what didn't happen to Lebanon during the difficult year of 2005.

The economy did not collapse.

There was no run on the country's banks. According to the IMF, deposits decreased only 5 percent. Lebanon's financial system performed well. The IMF particularly credits the actions of the Bank of Lebanon, the central bank.

The Bank of Lebanon also managed to protect the country's consumers by keeping inflation in check. As of its late October 2005 review, the IMF reported inflation was "stable at around 1 percent."

Before the civil war, Lebanon held a unique place in the middle east as a banking center and a trading hub. The long-established nature of the banking infrastructure, and the skill of the bankers themselves undoubtedly contributed to the resilience of the sector and prevented disaster.


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