War In Syria Affects Lebanese Banking

Lebanon’s banking system and economy are continuing to decline and remain unstable as a result of the on-going conflict in neighbouring country Syria, reports Arabianbusiness.com.

In past years, Lebanon has had a credit growth of about 8 to 10 percent, but recorded a muted growth coming into 2013. The public debt in Lebanon increased by 8 percent in 2012, climbing up to $58 billion. In addition to this, the country holds one of the largest public debt stocks in the world.

Since the dispute against the Syrian regime of President Bashar Al-Assad two years ago, the Lebanese banking system and economy have been suffering. Lebanon’s financial operations in Syria have been plummeting thanks to on-going losses. Banks in Lebanon are also experiencing profit loss because of credit charges and declining fee incomes. The war’s negative effect on the Lebanese banking system has helped to create an overall low confidence amongst consumers in the country.

Tourism in Lebanon is also feeling the pinch due to the trouble in Syria, warding off international tourists who are questioning the safety of surrounding countries. Beirut, once a popular holiday destination, is seeing a tourist decline of about 3.7 percent. Lebanon has even held off on construction, which fell 10.8 percent in the last year. If integral systems that feed economic growth continue to crumble, it is expected that Lebanese banks will continue to experience further asset-quality slumps.

A representative from the Middle East Moody’s Investors Services, which released a report on the banking system in Lebanon, commented, “The ongoing conflict in Syria and factious domestic politics will continue to adversely affect key sectors of the Lebanese economy over the 12-18 month outlook period, including trade, tourism, real estate and construction.”

The future of banking in Lebanon remains dismal, however a country with such great debt must be able to rely on a strong banking system to pull out of fiscal deficit and stabilize the economy.

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