Lebanon: Remittances in decline but holding steady this year
Indirect impact of low oil prices in GCC countries will have an adverse effect on Lebanon through lower remittances, capital flows
Lebanon’s economy is not in good health, as its main constituents are under pressure. The tourism and real estate sectors are on the decline.
However, expatriates’ remittances, which had decreased from $7.5 billion in 2014 to around $7.2 billion last year, are expected to remain steady this year.
“In the absence of political progress, sluggish economic conditions are expected to persist in Lebanon during 2016,” according to the World Bank.
“The economic prospects over the medium term are highly affected by geopolitical and security conditions, which remain decidedly volatile.”
The indirect impact of sustained low oil prices in member states of the Gulf Cooperation Council (GCC) will adversely affect Lebanon via lower remittances and capital flows.
Wissam Fattouh, secretary general of the Union of Arab Banks (UAB), says around two-thirds of remittances to Lebanon come from GCC countries, and this is why low oil prices will continue to impact remittances.
However, he says inflows are still in good shape and continue to bolster the economy, as there are other sources of remittances from North America and Africa.
Fattouh says the remittances will continue to play a vital role in the country’s economy. “We aren’t afraid of any negative impact, and have full confidence in the government’s fiscal policy,” he told Al Arabiya English.
The World Bank revised downward expatriates’ remittances to Lebanon in 2015 to $7.16 billion from a previous estimate of $7.5 billion.
“Remittance inflows to Lebanon decreased by 3.3 per cent in 2015, following a drop of 8.4 per cent in 2014,” according to Lebanon This Week, a publication of Byblos Bank, citing the World Bank.
Reports show that remittances to Lebanon accounted for 1.2 percent of the global flow in 2015, compared to 1.3 percent in 2014 and 1.4 per cent in 2013.
The UAB estimates that remittance inflows in 2015 constituted 16 per cent of Lebanese GDP.
In 2015, Lebanon was the second-largest recipient of remittances after Egypt among 16 Arab countries, and the third-largest among 49 upper middle-income countries, Lebanon This Week reported.
Elie Yashuei, a Lebanese economic expert, said capital inflows to Lebanon have shrunk by almost $2 billion.
“We have to look at remittances, foreign direct investments and any other type of capital inflows and outflows,” he told Al Arabiya English.
“We can’t focus on one of them, and the decrease appears clearly in the deficit of the balance of payments.”
In 2015, the balance of payments recorded $3.35 billion in deficit, with a growth rate close to zero.
“The decline in remittances is one element of this deficit. It’s an important one, but it’s not the only factor,” Yashuei said.
“The negative effects of the war in Syria, the pressures of the refugee crisis, and lower oil prices are all factors to be taken into consideration.”
No policy push
He added: “It’s all about confidence. The Lebanese government hasn’t shown any strong fiscal or economic policies.
“It hasn’t taken any valid steps toward convincing Lebanese expatriates or foreign investors that the country deserves a better look.”
With GCC states cutting down on project expenditure, Lebanese workers have been affected and their transfers to families at home have been under pressure. In turn, families have had to decrease spending and consumption.
Consumer prices are projected to decline by an average of 0.7 per cent in 2016 on top of a 3.7 per cent drop in 2015, before rising again by 2 per cent in 2017, according to the International Monetary Fund (IMF).
Despite downward pressure from lower oil prices, remittances to Lebanon are projected to rise to $8 billion in 2016, according to Central Bank Governor Riyad Salameh.
Private-sector deposits have softened in recent months, rising by $2.3 billion in the first five months of 2016, compared with growth of $3.5 billion over the same period last year.
Saudi Oger woes
Earlier this year, bank transfers from Saudi Arabia to Lebanon have stopped as part of measures taken by Riyadh, a local Lebanese newspaper reported, quoting banking sources. Lebanese workers in GCC countries remit as much as $5 billion annually. More than half of this amount comes from Saudi Arabia.
The financial problems of Saudi Oger company, owned by former Lebanese Prime Minister Saad Hariri, threatens around 9,000 Lebanese workers.
Huda, a 28-year-old teacher, says she is transferring $400 to her husband, who works for the company in Riyadh. “It should be the other way round,” she told Al Arabiya English.
“Despite accepting the fact that we stay apart as my husband will be in charge of our living expenses here, now the roles have changed, as he has been without a salary for 11 months.”