Lebanon”s way out of the global meltdown
The economic meltdown spreading throughout the globe has cut a wide swath, and Lebanon is no exception. The country is collectively holding its breath as it awaits the expected return of thousands of Lebanese workers from the Gulf emirates, and the ramifications to its economic and social fabric. These workers are coming back because job opportunities are drying up in once booming megalopolises like Dubai, which has been reported to be canceling an average of 1,500 work permits daily.
With the unemployment rate in Lebanon estimated at 20 percent, it is no wonder that many of the country”s residents seek opportunities abroad. While the exact figure is unknown, it is estimated that between 200,000 and 400,000 Lebanese work in the Gulf region. Relative to those from other countries in the Middle East, the Lebanese hold high degrees and most work in the Gulf emirates” banking and financial sectors.
Now these workers are facing a double whammy, not only because they are employed in the sectors hit directly and fiercely by the global financial crisis, but also because many hold high-ranking positions, which translates into higher costs to their employers, making them especially vulnerable to company cutbacks. The returning workers will be competing against those at home for jobs, taxing Lebanon”s already well-stretched resources. It is unclear what, if any, contingency plan the government has to deal with a situation that might bring further instability to a country no stranger to skirmishes.
To be sure, Lebanon”s monetary policies have shielded the country from the worst of the economic downturn, and the country may be better able to weather the storm than others. Its banking system is one of the most conservative in the region. Banks are prohibited from subscribing to risky products like subprime mortgages, a major cause of the downward spiral in the US economy. Additionally, the Central Bank has kept the exchange rate constant, creating further stability in the financial market.
In fact, the International Monetary Fund”s Executive Board recently declared that "the Lebanese financial system has so far weathered the global financial crisis … Despite its vulnerabilities, the Lebanese economy has shown a remarkable macroeconomic performance."
Does this mean Lebanon is out of the woods? Not quite. The economy is expected to grow by 3-4 percent this year, down from last year”s growth of more than 8 percent. And as the IMF cited in the same report, "the deepening global recession, unsettled international credit markets, and Lebanon”s exposure to regional spillovers underscore the importance of making further progress
One way the government can alleviate the potential crisis of thousands of workers returning is by encouraging more Lebanese and foreign investments – one of the biggest source of capital in any economy – to the country. As investment opportunities become increasingly scarce in many industrialized countries, many investors, especially those who live abroad, may find now to be an auspicious time to invest in Lebanon.
However, for this to happen – as well as for tourism, a major source of employment and contributor to Lebanon”s coffers to flourish – there must first be political stability. As Riad Salameh, the Central Bank”s governor, put it not long ago: "Lebanon would have seen much higher growth, due to a resurgence of consumption and tourism, if we didn”t have this political and security situation."
Lebanon”s economy is directly correlated to the country”s political stability and peace with its neighbors. This is why it is so critical that the new government that will emerge from the upcoming elections in June considers the diversity of the people living under its authority and their different ideologies. The incoming government should strive for a balanced path not only with its own citizens, but with the many countries that have an interest in the Middle East as well.
The cornerstone to any long-term economic stabilization plan in Lebanon is to solidify its tenuous political leadership. This requires that all Lebanese, from different parties to come together. The effect of the returning Lebanese workers will probably not be apparent until next September – fewer than five months away. Creating a united, strong and progressive Lebanese government will take longer than that, but if there”s something that the Lebanese people have in spades, it”s patience. And a restored Lebanon is more than worth the wait.