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|12 July, 2018

Lebanon Central Bank head says expects economy to grow 2% in 2018

Central Bank Governor also said the central bank expects inflation in Lebanon to be 4-5% in 2018

Lebanon's Central Bank Governor Riad Salameh looks on during during an interview with Reuters in his office in Beirut, Lebanon July 18, 2016. Picture taken July 18, 2016.

Lebanon's Central Bank Governor Riad Salameh looks on during during an interview with Reuters in his office in Beirut, Lebanon July 18, 2016. Picture taken July 18, 2016.

REUTERS/ Jamal Saidi

BEIRUT- Lebanon's Central Bank Governor Riad Salameh said on Thursday he expects the economy to grow 2 percent and for inflation to be 4-5 percent in 2018, noting that financial markets were awaiting the formation of a new government.

Speaking at an economic conference in Beirut, Salameh said the estimates were made in the light of a slowdown in the real estate sector and stable consumption.

Lebanon has been suffering weak growth since 2011, hit by regional turmoil. The IMF has estimated growth rates of 1-1.5 percent in 2017 and 2018, saying traditional drivers of the economy - construction and real estate - remain subdued.

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The IMF has also called for "an immediate and substantial" fiscal adjustment to improve the sustainability of public debt, which stood at more than 150 percent of gross domestic product (GDP) at the end of 2017.

Salameh noted the political situation in Lebanon, where a new unity government has yet to be agreed following parliamentary elections in early May. "The markets are waiting for the government formation," he told the Arab Economic Forum.

Leaders from across the divided political establishment have repeatedly sounded the alarm about the economy and the urgency of forming a government to implement long-overdue reforms and tackle unsustainable public debt levels.

Salameh said he expects bank lending to fall 1.6 percent in 2018 compared with last year and, based on data from the first five months of this year, for bank deposits to grow by more than 5 percent in 2018.

Lebanon's economy relies on the confidence of millions of expatriate Lebanese who deposit money in local banks. These buy government debt, which finances the expanding budget deficit and debt.

Foreign deposit inflows into the banking system have slowed since 2011. The IMF says private sector deposits grew 3.8 percent last year - below the average for recent years.

(Reporting by Lisa Barrington Editing by Gareth Jones and David Stamp) ((lisa.barrington@thomsonreuters.com; +961(0)1954456;))