Lebanon

Politics:

• Analysis

  Lebanon politics: Quick View - US lists former minister as a terrorist

  Event

  The US has added a former Lebanese information minister, Michel Samaha, to its list of "specifically designated global terrorists".

  Analysis

  Mr Samaha was arrested in August after he was accused of planning to lead a bombing campaign across northern Lebanon, ostensibly to spark sectarian violence. Mr Samaha is a friend and ally of Syria's president, Bashar al-Assad and when arrested, he was reported to have confessed that he was working on Mr Assad's behalf. The alleged bombing campaign in Lebanon was probably meant to distract global attention from the civil war in Syria.

  In issuing its designation, the US Treasury undersecretary for terrorism and financial intelligence, David Cohen, said that his government would "ensure" that Lebanon's sovereignty was not compromised. The strong links between figures in the Lebanese establishment and the Syrian regime mean that the arrest and designation of Mr Samaha is unlikely to deter attempts by the Syrian authorities to sow discord across the border. The US has offered its assistance to the Lebanese government to investigate unrest, particularly after the October 19th assassination of an intelligence chief, Wissam Hassan. However, Lebanon's government is hamstrung in its ability to pursue individuals or groups that would seek to draw Lebanon into greater sectarian chaos, given the presence of a large number of Syrian allies in the cabinet.

  Lebanon's prime minister, Najib Mikati, was silent after the US announcement but a representative of the pro-Syrian Change and Reform bloc was critical and said that the US was trying to "distract" the Lebanese people and that it was trying to increase pressure on Syria and Lebanon.

  December 19, 2012

• Background

  Lebanon: Constitution and institutions

  Lebanon's 1926 constitution declares the country a secular Arab state, a parliamentary democracy and a free economy. It recognises the rights of each religious community, but calls for the eventual "abolition of political confessionalism". The constitution was amended by the 1989 Taif Accord, which gave more power to the Sunni and Shia Muslim communities.

  The president and the prime minister

  Before Taif, executive power was held by the Christian president, chosen by parliament for a single six-year term. After 1989, executive power was in effect transferred to the Council of Ministers (cabinet), membership of which was divided between the main confessional groups, headed by a Sunni Muslim prime minister. The president is elected by the National Assembly (parliament) and, in theory, serves for one six-year term, although Syria forced three-year extensions to the terms of Mr Hrawi in 1995 and Mr Lahoud in 2004. The president appoints the prime minister after hearing the views of MPs.

  Parliament

  The National Assembly, led by a Shia Muslim Speaker, has 128 members, elected every four years, with all men and women over 21 eligible to vote. The next general election is due in mid-2009. With the exception of parties such as Hizbullah, candidates often run on family name, with no policy platform. Seats are distributed to ensure "balanced" sectarian representation: with half going to Muslim representatives, and half to Christians. Within these broad groups, a complicated list system ensures that representation reflects the perceived numerical strength of specific communities—for example, Shia Muslims, Sunni Muslims, Druze, Maronite Christians, Orthodox Christians, and others. Within the Assembly, MPs divide along regional and religious lines into blocs that must be won over by the government in order to secure passage of legislation. MPs' support is partly dependent on their ability to channel patronage—from state jobs to favourable planning decisions—to constituents.

  Lebanese parliamentary representation according to the 1989 Taif Accord
  Sectarian affiliation	No. of seats
  Maronite	34
  Greek Orthodox	14
  Greek Catholic	8
  Armenian Orthodox	5
  Armenian Catholic	1
  Protestant	1
  Other	1
  Christians	64
  Sunni	27
  Shia	27
  Druze	8
  Alawi	2
  Muslims	64
  Total	128
  Source: Europa Regional Surveys of the World, 2007

  Download text file (csv format)

  Administrative and judicial system

  The civil service and judicial systems are based on the French model, with authority concentrated in Beirut. There is a system of municipal administrations, but they have limited financial resources and little autonomy. A five-person Court of Justice deals with matters of state, working beside four courts of cassation, 11 courts of appeal and 56 lower courts, which deal with civil and criminal cases. These are brought by a government-appointed prosecuting magistrate, who exerts considerable influence over judges—for example, recommending verdict and sentence. Trials, particularly commercial cases, have nevertheless been known to drag on for many years. Matters of family law are judged by religious courts representing the 18 recognised religions. Civil marriage outside one of these religions is not legal, requiring individuals to marry within their own religious community, convert, or marry overseas.

  September 28, 2007

• Structure

  Lebanon: Political structure

  Official name

  Republic of Lebanon

  Form of state

  Parliamentary republic

  Legal system

  Based on the 1926 constitution (with amendments incorporated in 1990) and the Civil Procedure Code, the Criminal Procedure Code and the Penal Code

  National legislature

  Under the electoral law of July 16th 1992, the unicameral National Assembly has 128 seats, equally divided between Muslims and Christians

  Electoral system

  Universal direct suffrage over the age of 21

  National elections

  Next parliamentary election due in June 2013

  Head of state

  The president must be a Maronite Christian. Michel Suleiman was elected by parliament on 25th May 2008 for a six-year term

  National government

  The prime minister must be a Sunni Muslim and is chosen by the president after consultation with members of parliament. The cabinet is appointed by the prime minister and the president. Ministers need not be members of the National Assembly, but are responsible to it. Cabinet seats are customarily distributed on a sectarian basis

  Main political organisations

  Political parties tend to be weak and organised on a sectarian basis. The "March 14th" alliance is headed by the Future Movement (Sunni) with the Lebanese Forces (Christian) in loose alliance with the Progressive Socialist Party (Druze) and the Phalange (Christian). The "March 8th" bloc comprises Hizbullah (Shia), Amal (Shia) and the Free Patriotic Movement (Christian)

  Prime minister: Najib Mikati (Sunni Muslim)

  Deputy prime minister: Samir Mokbel (Greek Orthodox Christian)

  Key ministers

  Culture: Gaby Layoun (Greek Orthodox Christian)

  Defence: Fayez Ghosn (Greek Orthodox Christian)

  Economy & trade: Nicolas Nahas (Greek Orthodox Christian)

  Education: Hassan Diab (Sunni Muslim)

  Energy & water: Gebran Bassil (Maronite Christian)

  Environment: Nazem Khoury (Maronite)

  Finance: Mohammed Safadi (Sunni Muslim)

  Foreign affairs: Adnan Mansour (Shia Muslim)

  Health: Ali Hassan Khalil (Shia Muslim)

  Industry: Freij Sabounjian (Armenian Christian)

  Information: Waleed Daouk (Sunni Muslim)

  Interior: Marwan Charbel (Maronite Christian)

  Justice: Shakib Kortbawi (Maronite Christian)

  Labour: Salim Jreissati (Maronite Christian)

  Public works & transportation: Ghazi Aridi (Druze)

  Social affairs: Wael Bou Faour (Druze)

  Telecommunications: Nicolas Sehnaoui (Catholic Christian)

  Tourism: Fadi Abboud (Maronite Christian)

  Parliamentary speaker

  Nabih Berri (Shia Muslim)

  Central bank governor

  Riad Salameh (Maronite Christian)

  December 04, 2012

• Outlook

  Lebanon: Key developments

  Outlook for 2013-17

  • The Economist Intelligence Unit expects politics in Lebanon to be fractious in 2013-17. We expect the country to enter a period of intermittent violence as the civil war in Syria spills over the border.
  • The prime minister, Najib Mikati, will struggle to balance the competing demands of factions within his cabinet, and policymaking will be affected by routine disruptions to security.
  • The unrest in Syria will dominate politics in the near term. Disagreements between groups that are opposed to the Syrian regime and groups that support it will often descend into violent clashes.
  • We have increased the forecast for the fiscal deficit in 2013 to 8.9% of GDP as tax revenue will be subdued. The fiscal account will post large deficits, averaging 7.5% of GDP over the entire forecast period.
  • Growth in 2013 will be weak as security issues and political differences stymie decision-making and as the Syrian civil war continues to negatively affect the economy. Growth will be more robust from 2014 onwards.
  • Banque du Liban (the central bank) will maintain the peg of the Lebanese pound to the US dollar throughout the forecast period. It will maintain high foreign reserves in order to defend the currency against flights to quality.
  • The current account will record large deficits in the forecast period, averaging 11.3% of GDP, as Lebanon relies on energy imports.

  Review

  • The opposition March 14th bloc has refused to attend another round of a "national dialogue" until a new government is formed. The president, Michel Suleiman, has failed to convince March 14th otherwise.
  • Supporters of Hizbullah and those of a Sunni Salafi cleric in Sidon have clashed leaving three people dead and five injured.
  • Hizbullah has condemned the Israeli attack on Gaza, but it will remain on the sidelines as it faces considerable opposition from within Lebanon.
  • Lebanon has asked for US$450m in aid from the international community to assist with the growing number of displaced refugees.
  • The central bank governor, Riad Salameh, has warned that "careless funding"-referring to the proposed increase in public-sector wages-would have a detrimental affect on the economy.
  • Fiscal data for the first seven months of 2012 showed a worrying 10.7% rise in state spending, with expenditure reaching L£10.8trn (US$7.16bn).

  December 04, 2012

Economy:

• Background

  Lebanon: Economic background

  Main economic indicators, 2006
  (Economist Intelligence Unit estimates unless otherwise indicated)
  Real GDP growth (%)	-2.8
  Consumer price inflation (av; %)	4.0
  Current-account balance (US$ m)	-1,827.0
  Exchange rate (av; L£:US$)	1,507.50(a)
  Population (m)	3.6
  External debt (year-end; US$ m)	32,069.0
  (a) Actual.
  Source: Economist Intelligence Unit, CountryData.

  Download text file (csv format)

  September 28, 2007

• Structure

  Lebanon: Economic structure

  Data and charts: Annual trends charts

  
  

  

  December 04, 2012

• Outlook

  Lebanon: Country outlook

  Lebanon: Country outlook

  FROM THE ECONOMIST INTELLIGENCE UNIT

  POLITICAL STABILITY: The political scene will be fractious over the forecast period. The government is largely composed of members of the "March 8th" alliance, which favours keeping Lebanon within the Syrian sphere of influence and is opposed by the "March 14th" bloc, a broadly nationalist group that seeks to shift Lebanon into the orbits of Saudi Arabia, the US and France. Clashes between supporters of a Shia group, Hizbullah, and those of a Sunni Salafi cleric, Sheikh Ahmed al-Assir, in Sidon, which closely followed the assassination of a senior security official, Wissam al-Hassan, have resulted in a political stalemate. Members of the March 14th bloc refuse to communicate with the March 8th alliance as they are fearful for their safety--the protection offered to them by Mr Hassan is no longer there. The president, Michel Suleiman, has called for both parties to participate in a "national dialogue", but March 14th refuse to attend until a new government is formed. The national dialogue is a loosely formed grouping, which bypasses the government and formal structures of state to bring together the heads of sectarian groups, parties and leading families, arguably the real political powers in Lebanon. With the civil war in Syria, the Economist Intelligence Unit expects Lebanon to enter a prolonged period of intermittent political and religious violence.

  ELECTION WATCH: The next parliamentary election is scheduled for 2013 and has already come into the spotlight owing to a new electoral law, which has been approved by the Hizbullah-influenced cabinet. Debate over the law is already under way in parliament, but minority communities will resist any measure that would weaken their representation in parliament. Parliament will elect a president in 2014, but these elections have often been decided by negotiated deals between political factions rather than by free votes.

  INTERNATIONAL RELATIONS: The recent clashes in Sidon are evidence that Lebanon is firmly embroiled in the Syrian civil war, as political tensions between March 8th and March 14th have been raised over their differences on Syria. In addition, Syrian refugees and activists use the border region as a base from which to attack that country's regime. The government has tried to avoid making any direct condemnation of the Syrian regime, but this policy has increased domestic sectarian and political tensions. So long as the Syrian president, Bashar al-Assad, remains in power, Lebanon will be at risk of political violence.

  POLICY TRENDS: Progress on economic reforms will not be prioritised, as policymakers are preoccupied with the risk of political unrest. Fiscal reform, particularly expanding revenue collection, is vital to the reduction of the structural deficit (a result largely of the high cost of servicing the massive public debt incurred after the civil war). However, the prime minister will face resistance to any spending cuts, as patronage networks permeate the political system and many politicians have their own interests in maintaining a bloated public sector. The electricity sector is also in dire need of reform as the country continues to suffer from power shortages, particularly during the summer months. The cabinet has approved a large investment programme, under which US$5bn will be spent on the expansion of capacity and the establishment of a new regulatory authority. The development of offshore natural gas will receive considerable attention from the government. However, given the current rise in political tensions, the pace of progress in terms of moving ahead with plans to issue licences for exploration will be slow.

  ECONOMIC GROWTH: Economic growth in 2013 will be weak at 1.8% as political tensions continue to rise among the two main Muslim communities, and the civil war in Syria, which shows no signs of ending, continues to have a negative impact on Lebanon's economy. Lebanon's service-oriented economy is highly sensitive to political events. Growth prospects depend upon regional performance, as Arab states are the principal consumers of Lebanon's services, and perceptions of political risk. As the unrest in Syria continues and spreads increasingly into Lebanon, tourism and related investment in property will suffer, dragging down growth. From 2014 onwards growth is forecast to pick up substantially, averaging 4.4% in 2014-17, assuming that the situation in Syria stabilises. Growth will be driven by high private and government consumption, as well as robust growth in services export volumes. Investment will increase in 2014-17 as international firms are tempted by the potential of sizeable offshore natural gas reserves. However, this is a relatively benign scenario, and there are significant downside risks that have the potential to drag down Lebanon's economy. A further escalation of inter-communal violence could lead to a sharp economic contraction and see investors pull their money out of Lebanon.

  INFLATION: Inflation on the domestic front is driven by high housing costs and is exacerbated by high international fuel and food costs. Price rises for fuel and housing can provoke instability, but the government has little flexibility to subsidise commodities. Inflation will be manageable in 2013-14, averaging 3.8%, as non-oil commodity prices dip slightly, but this will be offset to some extent by the increase in public-sector salaries. Riad Salameh, the governor of Banque du Liban (BdL; the central bank), has warned that wage increases could add as much as 3% a year to inflation and reduce employment by 4% a year. In addition, we expect property prices to fall as foreign demand for housing drops because of the domestic political instability fuelled by the Syrian crisis. Inflation is forecast to pick up towards the end of the forecast period as global commodity prices rise, reaching an average of 5.8% in 2017. There are reports that the inflation basket does not accurately reflect everyday consumption and that consumer price growth is thus understated. An increase in minimum wages has also reportedly led to higher prices as merchants pass costs on to consumers.

  EXCHANGE RATES: The Lebanese pound is expected to remain pegged to the dollar within a band of LP1,501-1,514:US$1. The BdL's firm commitment to defending the peg is aided by its ability to influence interest rates, high levels of assets and strong support from local commercial banks. Were Lebanon to experience serious capital flight, it would need to draw down its foreign reserves to support the pound. Lebanon's reserves provide it with an ample 18 months of import cover.

  EXTERNAL SECTOR: New data released by the Customs Department shows that the trade deficit has widened in the first eight months, mainly because of a rise in import costs. Lebanon will continue to record wide current-account deficits in 2013-17, averaging 11.3% of GDP, as it relies on imports of energy, industrial raw materials and food. The deficits will narrow consistently over the forecast period, from 16.2% of GDP in 2013, when the economy will suffer because of the crisis in Syria, to 7.1% of GDP in 2017, when there is likely to be greater political stability. Remittances will help to offset the trade deficit (although they may decline, as the UAE has hardened its visa policy towards Lebanese nationals). Low returns on Lebanon's stock of foreign reserves and high external debt payments will keep the income balance in deficit. The current-account deficit is normally covered by capital inflows (direct investment from other Arab countries and purchases of foreign-currency government bonds), although many of these inflows are unrecorded.

  December 01, 2012

• Forecast

  Lebanon: 5-year forecast summary

  Outlook for 2013-17: Forecast summary

  Forecast summary
  (% unless otherwise indicated)
  	2012a	2013b	2014b	2015b	2016b	2017b
  Real GDP growth	1.7	1.8	3.4	4.4	4.6	5.3
  Consumer price inflation (av)	6.2	4.5	3.1	4.0	5.0	5.8
  Consumer price inflation (end-period)	8.4	2.1	3.8	5.0	2.0	6.1
  2-year Treasury bill rate	5.9	6.3	6.4	6.5	6.5	6.8
  Government balance (% of GDP)	-7.2	-8.9	-7.4	-8.1	-6.7	-6.2
  Exports of goods fob (US$ bn)	5.7	5.6	5.5	5.6	5.7	6.0
  Imports of goods fob (US$ bn)	20.9	22.1	24.1	26.5	30.0	34.2
  Current-account balance (US$ bn)	-8.0	-7.9	-7.4	-6.2	-5.8	-5.4
  Current-account balance (% of GDP)	-17.8	-16.2	-14.1	-10.5	-8.7	-7.1
  External debt (year-end; US$ bn)	30.3	32.1	33.6	36.0	37.9	36.5
  Exchange rate L£:US$ (av)	1,508	1,508	1,508	1,508	1,508	1,508
  Exchange rate L£:€ (av)	2,098	1,935	1,903	1,888	1,899	1,898
  Exchange rate L£:€ (end-period)	1,951	1,945	1,892	1,862	1,899	1,895
  Exchange rate L£:¥100 (av)	1,889	1,899	1,825	1,739	1,636	1,649
  a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts.

  Download the numbers in Excel

  Download text file (csv format)

  December 04, 2012

View detailed map

Country Briefing

Land area

10,452 sq km

Population

4.2m (IMF estimate, mid-2008), excluding around 216,000 Palestinians living in refugee camps

Population in '000 by governorate administration (National Survey of Household Living Conditions, 2004)

Beirut (capital): 391

Mount Lebanon (Beirut environs): 1,502

North Lebanon: 769

The Beqaa: 471

South Lebanon: 401

Nabatiyeh: 221

Climate

Subtropical; cool in highlands

Weather in Beirut (altitude 34 metres)

Hottest month, August, 23-32°C; coldest month, January, 11-17°C (average daily minimum and maximum); driest months, July and August, 1 mm average rainfall; wettest month, January, 190 mm average rainfall

Languages

Arabic. English and French are widely spoken

Measures

Metric system

Currency

Lebanese pound (L£). Average exchange rate in 2008: L£1,507.5:US$1

Time

Two hours ahead of GMT (Lebanese summer time is three hours ahead)

Fiscal year

January 1st-December 31st

Public holidays

The dates of Islamic holidays are based on the lunar calendar and are therefore approximate. New Year's Day (January 1st 2012); Orthodox Armenian Christmas (January 6th); St Maroun's Day (February 9th); Prophet's birthday (February 4th); Easter (April 6th-8th); Orthodox Easter (April 13th-15th); Labour Day (May 1st); Martyrs' Day (May 6th); Resistance and Liberation Day (May 25th); Assumption Day (August 15th); Eid al-Fitr (August 19th); All Saints Day (November 1st); Eid al-Adha (October 26th); Independence Day (November 22nd); Islamic New Year (November 15th); Ashoura (November 24th); Christmas Day (December 25th)

March 05, 2012