Lebanon in denial, Part I.
February 3, 2009 12:36 by Zeinab Charafeddine
As a net importer of commodities and manufactured goods, Lebanon will also most likely benefit from the global fall in commodity prices. The London-based Economist Intelligence Unit has forecast that the country’s export earnings will fall from $5.09 billion in 2008 to $4.89 billion in 2009, with the main slowdown in the export of agriculture products and processed food. But overall, the balance of payments deficit will be eased, thanks mainly to the falling price of oil.
But Lebanon is vulnerable to aspects of the world economic slowdown. Like any country in the region, its outlook is tied up closely with the GCC countries, especially because of its dependence on remittances. These make up around $6 billion, roughly a quarter of GDP, with a substantial proportion coming from the 400,000 Lebanese who work in the United Arab Emirates, Saudi Arabia, Qatar, Kuwait, Oman and Bahrain.
The healthy GCC economies are also vital for tourism and real estate: two crucial sectors of the Lebanese economy. GCC nationals made up nearly half of the 1.1 million visitors who came to Lebanon in the first 10 months of the year; the highest number since 2004, making the tourist season around 30 percent more lucrative than it was in 2007.
Property sales rose 26 percent in the first nine months of the year, the total value of sales by 81 percent. Those increases have been driven by Lebanese expatriates, many based in the Gulf, with luxury properties snapped up by GCC nationals.
“Our major clients are from the Gulf, and these people are facing huge losses with the international credit crunch,” says the chief financial officer of a real estate company who wished to remain anonymous. “People facing a shortage of liquidity are not going to be splashing money on real estate.”
The financial officer feels it is impossible as yet to know the extent of the slowdown. “Once those with liquidity begin to hope that prices will go down, they will delay, and this can freeze the market. It’s hard to judge. If we compare with last autumn [when traditionally real estate activity slows down] we are talking about the period before Doha, when the market was slow for political reasons.”
Raja Makarem, managing director of Ramco real estate consultants, argues that a 40 percent rise in prices in the first eight months of 2008 was “unhealthy,” and reflected demand pent up by political problems. Makarem expects demand to remain strong for sea-front properties and well-located sites, while easing for the kind of medium-level apartments sought by those worried about their job security. “Overall, prices are still competitive and affordable in regional terms,” he says.
There is also considerable fallout from the decline in GCC capital markets. Shares in Solidere, Lebanon’s biggest listed company, lost more than half of their value from July to mid-November.
Al-Zorah, the $60 billion project to be built on reclaimed land as a partnership between Solidere and the Ajman government in the UAE, has announced it is likely to be two years late, on a completion target of 2023. Solidere established its international arm in 2006 because of sluggish development in Beirut City Centre, which is still incomplete 17 years after the firm was set up…
First seen in Trends magazine.
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