GDP expectations lowered

Merrill Lynch and HSBC revise downwards their GDP growth forecasts on higher political risks

HSBC Bank and Merrill Lynch revised downwards their real GDP growth forecast for Lebanon in 2011.
HSBC downgraded its forecast to 1.7 percent from a July estimate of 2.4 percent. Merrill Lynch reduced its projection to 2.5 percent, from an earlier forecast of six percent. The two investment banks attributed their new projections to domestic instability, and regional political risks.

HSBC expressed concern about the fiscal position. It said that the ten percent rise in revenues in the first half of the year included a one-off payment (the transfers of the Telecommunications Ministry which has not yet been made). It said that when removing this item, budget revenues were actually down seven percent year-on-year, while expenditures were up ten percent. It said that the actual figures put the country on track to post a fiscal deficit of 8.2 percent of GDP in 2011.

Merrill Lynch said that the 2012 draft budget is similar to the one submitted by the previous Cabinet, but that it comes at a time where the economy faces numerous headwinds. It said that the proposed tax increases could slow the economy further.

Merrill Lynch expected the increase in the minimum wage to distress the private sector. It also warned that the absence of structural reforms to reduce the government's borrowing needs, along with lower economic growth, would spur an increase in public debt.