LEBANON: ECONOMY OVERVIEW

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84B00049R001800230009-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 2
• Document Creation Date: December 20, 2016
• Document Release Date: April 30, 2007
• Sequence Number: 9
• Content Type: REPORT

Approved For Release 2007/05101 :CIA-RDP84B00049R001800230009-4
LEBANON: ECONOMY
OVERVIEW
1. The Lebanese economy has demonstrated remarkable resiliency
to seven years of civil war. Although economic activity has declined in
peri ods of heavy fi ghti ng, total o~~utput i n 1981 was essentially the same
as in 1977. Moreover, foreign exchange reserves remained fairly constant
over the same period.
2. The more negative aspects of recent economic trends include an
annual inflation rate of about 25 percent in the last few ydars (which
has forced the government to run substantial budget deficits) and a growing
foreign trade imbalance. Nevertheless, should a modicum of stability return
to the Lebanese political scene, the economy could quickly rebound. It retains
a large reservoir of educated and skilled workers and a highly liquid banking
system that could provide funds for investment to get economic activity
back on an upswing.
 Approved For Release 2007i0510~~~R T DP84B00049R001800230009-4
LEBANON: ECONOMIC FACT SHEET
1977 1978 1979 1980 1981
Real GDPa ~ 68 -3 2 2 _1
(percent change)
Consumer Pricesa 19 10 24 24 25
(percent change)
Foreign Exchange Reserves 1569 1835 1532 1588 1516
(million US $)
a) Estimated.
Economic activity in recent years has been inversely related
to the level of fighting. The Israeli invasion has resulted in
the virtual halt of production in Beirut and disruptions in
southern Lebanon. Northern Lebanon was not greatly affected.
The Lebanese Government, which ran budget surpluses prior~a
the civil war, has incurred increasingly larger deficits since.
Budget expenditures have surged in recent years due to public
sector wage increases to offset inflation, subsidies, and
transfers to municipalities. Tax collection, has been severely
hampered by the lack of government control in many areas of the
country. The government lost an estimated $400 million a year in
customs revenues--`.traditionally the most important revenue
source--br~se of sm uggling through both official and illegal
Lebanon's trade deficit has increased considerably since the
end of the civil war, reaching an estimated $3.6 billion last
year. Worker remittances--an estimated $2 billion a year--and
capital inflows have financed the trade deficit. Contributions
to various political parties and armed militias totalled about
$150 million a year, and another $700 million annually is
repatriated by Lebanese firms operating in other countries.
Lebanese economic planners maintain that at least $12
0
billion in grants and concessional loans from abroad will be
needed for reconstruction. These funds would be used to repair
damage resultom the invasion and from factional fighting
since 1975. lul
Lebanese political and business leaders hope the United
States will launch a "mini-Marshall Plan." Political instability
and the Israeli presence will limit, at least in the short run,
the amount of funds multinational lending agencies and the
wealthy Arab states will be .willing to commit to Lebanon. There
is little economic incentive for the Arabs to pump money into
Lebanon because the services once provided there are now being
supplied elsewhere in the Arab world. Under certain conditions,
the World Bank is willing to take the lead on reconstruction
efforts, presumably with large financial support from Arab
donors. These conditions include establishment of a strong
central government that can exercise control throughout the
country. Lebanese reconstruction will be discussed at the annual
IMF/World Bank meeting in Toronto this weekend.