Goldman Sachs report underlines stability amid Lebanon's economic challenges
Date
5/23/2024 5:52:30 AM
(MENAFN) In a recent report, the US investment bank Goldman Sachs acknowledged that despite the significant economic and political challenges facing Lebanon, there are some indications of stability in the country's economic indicators. Notably, the bank highlighted the stability observed in the currency following its devaluation and the subsequent unification of the exchange rate last year. This stability has contributed to alleviating internal inflationary pressures, with the consumer price index dropping to 70 percent on an annual basis in March. This is a notable decline from its peak of 270 percent on an annual basis one year prior, as reported by the Arab World News Agency (AWP).
Goldman Sachs further noted that the currency devaluation has had several positive effects, including the stimulation of remittance flows from Lebanese workers abroad, a reduction in imports, an improvement in the balance of payments, and a modest increase in foreign exchange reserves. Despite these encouraging developments, the bank cautioned that Lebanon still faces significant economic challenges. For instance, the ongoing impact of the conflict in the Gaza Strip has resulted in a notable decline in tourism flows, which have decreased by approximately one-third since October last year.
Additionally, Goldman Sachs highlighted the likelihood of continued tensions along Lebanon's southern border with Israel throughout the remainder of the year, with risks of escalation remaining high. The report also noted the ongoing limitations on traffic through the Beirut port, with container movement declining by about a third compared to pre-existing levels following the devastating explosion that destroyed much of the port's infrastructure in 2020.
Furthermore, the bank emphasized that progress towards formulating a deal with the International Monetary Fund (IMF) has been slow, despite two years having passed since the signing of an agreement at the expert level. This agreement included various conditions, such as the approval of a strategy to restructure banks by the Council of Ministers or Parliament, the development of enabling legislation, and the auditing of the country's 14 largest banks. However, the necessary steps towards meeting these conditions have been slow to materialize, prolonging Lebanon's economic challenges amidst ongoing uncertainties.
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