Economy

C.R.E.A.M – Cream Get The Money…

BDL Support

In September 2014, Lebanese Speaker of Parliament Nabih Berri strongly rejected any further extensions of Parliament’s mandate. Speaker Berri’s stance further underscored the threat of administrative shut down in a […]

In September 2014, Lebanese Speaker of Parliament Nabih Berri strongly rejected any further extensions of Parliament’s mandate. Speaker Berri’s stance further underscored the threat of administrative shut down in a country that has been without a president since May 2014. With Parliamentary elections set for November 2014, time is running out to reach a quick settlement. It is under these circumstances that the Banque du Liban (BDL), Lebanon’s central bank, is struggling to preserve the economy, while striking state employees, water and electricity shortages, regional instability, and a massive influx of Syrian refugees all threaten to derail economic progress. In early 2013, BDL deployed a stimulus package that was structured to boost economic growth through incentives supporting housing development, education, renewable energy projects, innovative projects, R&D ventures, entrepreneurship, and other productive sectors of the economy. The majority of the funds were directed toward stimulating the housing sector, which received 56% of the $1.47 billion package. Meanwhile, environmentally friendly projects received 20%, and the productive sectors received 14%.

An additional stimulus package of $800 million was added in late 2013 by the BDL to help carry the stimulus program into 2014. Assessing the success of the stimulus requires weighing Lebanon’s modest overall gains against geopolitical factors and the costs of hosting a refugee population one-fourth the size of the Lebanese population. And while the economy grew by 1.5% in 2013, with similar rates expected for 2014, pinning down how much growth was driven by the stimulus is complicated.

As intended, the focus on housing has paid off, with 96,000 home loans supported by the package. Developments in the housing sector are good news to realtors in Lebanon, who watched as foreign ownership declined by 8.9% in 2012, and 8.6% in the first half of 2013. The stimulus package offered low interest rate loans to buyers of homes valued under $533,000, triggering a rise in demand from younger first-time homebuyers. Construction permits also rose during the first four months of 2013, rising 0.8% compared with the same period a year earlier. In 2014, property sales rose 6.6% YoY, which moved the value of property sales transactions up by 17.7%. Meanwhile, construction permits issued also rose by 14.5% during the first five months of 2014.

In late 2013, the BDL issued a circular allowing other banks to invest in venture capital projects and other tech-related developers. The mandate provides interest free credit for up to seven years and guarantees 75% of banks investments. In addition to benefitting established Lebanese venture capital firms like Berytech and Middle East Venture Partners (MEVP), new firms are emerging to take advantage of available tech funding. Leap Ventures (Comgest) announced a $50 million-$100 million fund to be invested in 10 companies, and aimed at acquiring companies already developed at rates of up to $10 million per company. Analysts considered Lebanon’s start-up environment to be conservative, which translates into higher success rates. For VC firms, the tech market might be one of the soundest local investments. In addition, major firms like Berytech and MEVP will both be investing in a community-wide incubator/accelerator, for which $5 million has already been raised.

Perhaps the most immediate measure of the stimulus program is its affect on the banking sector. Here, the outlook is stable, with modest growth over 1H2014. Measured by total domestic assets operating in the country, the sector grew by 3.4%, to $170.5 billion by the end of June 2014. Between December 2013 and June 2014, deposits increased by $4.1 billion, which was less than the increases of the previous period. In contrast, bank lending grew in vigor, with YoY loans increasing by 5.7% in the first half of 2014. This number was almost twice that of the previous year, indicating that on the banking side, the stimulus was in full effect. If the banks are able to leverage their solid financial foundations through this period of economic duress, they may well come out as the saviors of Lebanon’s economy.

You may also be interested in...

Economy

Cost of Change

Lebanon's Protests and the Economy

View More
Beautiful,Woman,Standing,Outdoor,Wearing,Professional,Business,Formal,Fashion.,Arab

Telecoms & IT

What to Wear?

Lebanese fashion

View More
Lebanese,Village,Villa,With,Brick,Roof

Real Estate & Construction

More to Offer

Real estate growth

View More
42f35a4a-50d0-412f-9e08-be971a557ae4

Health & Education

Modern Thinking

Technology in schools

View More
f7e0467e-48de-4d86-91f4-e9c3f1a897f6

Transport

Open the Gateway

Port of Tripoli

View More
Tech Hub

Telecoms & IT

Tech Hub

The tech start-up scene

View More
Mom & POP

Industry

Mom & POP

Family businesses

View More
Stairway to prosperity

Finance

Stairway to prosperity

Youth and finance

View More
Not Easy Being Green

Green Economy

Not Easy Being Green

FOCUS Electricity sector reform plan

View More
I Have a Plan

Economy

I Have a Plan

Lebanon’s economic vision

View More
View All Articles