27 April 2017

BEIRUT: Saad Azhari, the chairman and general manager of BLOM Bank, Wednesday underlined the importance of investing more in Lebanons infrastructure and tackling unemployment.

Concerning Lebanese economic trends, they are parallel to the regional ones, except that short-term political instability seems to have been notably reduced in Lebanon. The country remains in dire need of an infrastructure overhaul, and suffers from serious youth unemployment and brain drain, Azhari told participants at BIFEX 2017, held at BIEL.

He also pinned high hopes on the prospects of oil and gas in Lebanon.

These are underpinned by promising developments in the oil and gas sector, by nascent growth in the IT sector driven by BDLs Directive 331 initiative, and by a significant potential upturn in exports of goods and services, including tourism and exports to aid in the rebuilding of Syria. Moreover, these sectoral economic trends would alleviate chronic imbalances in the current account and the fiscal budget, through higher export revenues and oil royalties, which could restore them onto sustainable, manageable paths, he said.

Azhari also stressed the need to carry out reforms and modernizations in state institutions. Lebanons financial sector as reflected in its buoyant banking system has always been in better shape than its real sector. So if these potential economic trends and their implications were to fully materialize, then long-range, real-sector reforms such as establishing better governance in public institutions, enhancing the environment for greater entrepreneurship, and of course maintaining durable political stability are perhaps more needed than ever before. These reforms are necessary and sufficient if the country were to overcome its loss of competitiveness and agility, and finally put behind it the wasteful cycle of political conflict and economic stagnation, he said.

The BLOM chairman also touched on the issue of global economic trends. In case of global economic trends, I think it is important to take a longer-term view that looks beyond the short-term ups and downs of the economic and political cycle. And to the extent that events such the election of President Trump and Brexit point to deeper structural shifts, such as the backlash against globalization, immigration, and the rise of inequality, they present short- to medium-term challenges for policymakers to boost education and training and to address unfairness through well-targeted fiscal policies; but, most likely, they will not affect the long-term trajectory as determined by fundamentals like demographics and technology, he said.

Azhari cited studies showing that emerging economies will represent 50 percent of the world GDP in the next 10 years. Emerging economies will account for 50 percent of world GDP in about 10 years time and are already growing at twice the rate of developed economies. This will open up great opportunities for businesses prepared to make long-term investments in these markets. But that does not mean that businesses should give up on developed economies. Of the expected $14 trillion growth in consumption in the next 10 years, 40 percent will come from developed countries where the majority of [the] global upper-middle class lives.

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