Lebanon

Abstract

Lebanon’s economic position continues to be very difficult, with very low growth, high public debt and large twin deficits. While financial stability has been maintained, deposit inflows, critical to finance the budget and external deficits, slowed down during the past year, reducing the authorities’ room for maneuver. The new government has taken some important policy steps to start the needed policy adjustment, which could help raise confidence among investors and donors. The parliament has approved a plan to reform the electricity sector and reduce its fiscal cost as well as a budget that aims to reduce the overall fiscal deficit in 2019. However, substantial new measures are still needed to reduce the exceptionally large domestic and external imbalances and mitigate Lebanon’s vulnerabilities.