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Lebanon can be termed as a developing economy in the World. Economically speaking, the Lebanese economy can be called as a typical open economy which has a large banking sector. It is very important to know that the banking sector of Lebanon is 2.5 times more than its economic sector and in that way it provides a very important support to the general and aggregate demand of the country.


The country had gone through a 15 year long civil war, from 1975 to 1990 which had seriously affected its economic infrastructure. This also cut out the national output by half, but Lebanon's position as the banking hub of the Middle Eastern countries had not been affected by the aspect. After the civil war ended the Central Government restored powers and began the general operations like tax collection, gaining access to the key transport areas and other important government facilities.

Slowly the GDP of the country began increasing and it expanded to 353% in the 1990. The economic recovery of the country was directly helped by a sound banking system of the country and a huge number of small and medium scale manufacturers, farming and most importantly international aids, which was at a point of time was the only source of foreign exchange in the country. After the launch of "Horizon 2000", a $20 billion reconstruction project headed by the Government, the economy of the country made impressive gains.

In the year 1994 the real GDP was 8% and in 1995 it was around 7%. During the period between 1992-1998, the annual inflation of the country fell from more than 100% to a mere 5% and the general foreign exchange rates of the country changed to more than $6 Billion from $1.4 billion. But all along that the Lebanese pound had mentioned its stability. Progress can be seen in the infrastructure of the war ravaged country's infrastructure. Solidere, a firm worth $2 billion has been entrusted to the restructuring of the central business district of the capital city Beirut. In the month of January in 1996, the stock markets reopened which marked the return of the international banks and other insurance companies to the market of Lebanon. But still there are some very important challenges that await the Government in the economic arena.

The government must fund the restructuring of the country by tapping foreign resources. The budget deficit has to be reduced along with that. Another very important aspect is that the Lebanon's Government has to shorten the gap between the rich and the poor which had been gradually widening since the beginning of the 1990s. And it had resulted in the grass root dissatisfaction over the distribution of the general economic benefits of the country. The Lebanese pound has been pegged to dollar from September 1999, and from the year 2000 the customs duties are reduced significantly through out the country which has increased business activities.

There are three very important financial reforms of the country and they are as follows:

  • The economic revival of the private sector along with the sustainable growth.
  • The government aims to fiscal consolidation and different types of structural improvement in the public sector
  • The price stability and the new financial policies are very important in the aspect of the business and economic conditioning of the country.

Some Aspects of the Economy:

1. Lebanon has reconstructed its economy and infrastructure, and more than 80% of the basic infrastructures have been rehabilitated with the use of the best technologies.

2. Most of the general business laws and regulations of the country have been revised thoroughly.

3. The banking sector of Lebanon is highly reputable and has a high financial standing. It has been strictly regulated by the Central Bank.

4. Lebanon has initialized a process which helps to develop the domestic capital market and it is accessed frequently by the international markets.

5. To stimulate the economy, the government has launched an in-depth growth oriented measures that are generally aimed to stimulate the economy.

Major Economical Sectors of Lebanon:

The liberal economy of Lebanon is mainly based on competition and general private ownership. The two predominant sectors, Services and Banking represent around 70% of the country's gross national product. Other important parts are the industrial sector (20%) and the agricultural sector (10%).


The economy of the country is primarily based on the services sector, and it is accounted for around 60% of the GDP of the country. There are several major sub-sectors of the services sector, like commerce, financial services, tourism, health care, higher education etc.

Commerce: The Port in Beirut is the most important place of all commercial activities in Beirut. Historically speaking, after the World War II, it became the most important port in the whole Arab World, and now it is a free port area and a popular destination for re-exporting goods which adds to the success of the commerce in Beirut.

Tourism: Lebanon is situated in a strategic position and the climate and general natural beauty of the country add up to the tourist attraction of the place. The place has snow capped mountains, valleys and most importantly the Mediterranean Sea. It is considered as a natural tourist attraction and tourists from all over the world come to visit here. Most importantly, it has got qualified human resources that help to develop the tourism industry. For the record, it is the only Arab country that offers snow sports activities for the tourists.

Before the country broke into domestic conflict tourism was accounted for around 20% of the total GDP of the country, and it was at a time when the international tourism was not that developed.

In recent times after peace has returned to the land, it has been observed that a significant amount of private investment is going on in the place, which includes modernization of the facilities along with the expansion. Many international hotel companies are making their presence felt in the country. One of the very important aspects of the industry is that it depends on a huge number of Lebanese people who live abroad and return to their country every year.

Financial Services: From the beginning of the 1950s to the beginning of the civil war in the 1970s, the country was the financial heart of the Arab region. When the oil boom began in the zone in the 1960s, the Lebanese banks were the main recipients of the "petrodollars" that came from all over the World. Now the main sectors are commercial banking, insurance based services and investment banking. But the most important of all of the services is the commercial banks and they have witnessed enormous growth from the year 1992. Statistically speaking these banking sectors plays a key role in the process of capital inflow in the area. In Beirut, a number of investment banks have been established and the capital is raised offshore along with a number of commercial banks.

The government has decided to establish Beirut as the regional financial service center. In the year 1994, the Central Bank had established an agency named MIDCLEAR, which is a central depository, along with a settlement and clearing agency. The stock exchange in Beirut was re-opened in the year 1996.

Construction: Before the country fall into the civil war, the property sector was very important for the general economy of the country. A substantial part of the general construction activities were centered in Beirut, which had seen a boom in construction based activities from the end of the 1950s to the beginning of the 1970s. Different tourist attractions like Aley, the mountain town, were also a part of the boom.

After the conflict, the construction boom returned to the country. The real estate prices began to rise for the prime properties, but in recent times the prices have been stabilized. The boom was fueled by the Arab funds and other investors from different parts of the World. The residential properties are made with an eye to the upper end of the market. But it have been slowed a bit since the year 1996, due to general supplier based problems, but it will turn around as it is hoped.

Industry: The industrial sector of the country consists of furniture, paper, cement, cosmetics, detergent powder, batteries, garments, processed foods, cement etc. It is important to know that all the industry in the country is privately owned. The general exchange rates and the stability of price along with the gradual fall of the Lebanese pound interest rates made a better environment for investment and the subsequent growth of industries in the country. The Government is also very supportive towards the industrialists and provides different types of incentive for the general establishment of industrial facilities in the country. Some times fiscal incentives are given in the form of reduced customs duties and direct exemptions of taxes.

Energy: Unlike the other important Arab countries, Lebanon has no known fossil fuel resources. It has some hydroelectric resources, and some parts of electric are derived from Syria. All the energy needs of the country is mainly based on exports from other countries, and the power sector of the country generally consumptions one third of the total fuel export.

Agriculture: Around one third of the total land of Lebanon is used for agriculture. The most fertile of all the lands is the coastal areas and the Bekaa Valley of the country. A huge number of fruits and vegetables grow in Lebanon, along with industrial crops and different types of cereals.

Distribution of Wealth:

In Lebanon, wealth and income are not distributed equally. There is no reliable statistics to show that, but the differences in income in the country have really increased after the end of the civil war and in the last 10 years. A recent survey shows that the general income of the upper middle classes and the middle classes have really increased in the country, but the lower class of people have not have any such appreciation in their income. Even some people living in the country have seen their incomes to drop behind the general poverty line. After the ban of the cultivation of Hashish, the farmers in the Bekaa Valley have been banned from a major source of income. The disparity in income can be seen in the regional lines too. As per the CIA World Fact Book, the average GDP per Capita in cities of Lebanon is US$ 5148, and it comes to US$ 620 per year in places like the Bekaa Valley and other parts of the country.

In the year 1997, unemployment was estimated around 18%. With the declining economic conditions in the country, the public sectors have been facing a number of strikes that are reducing the production through out the country. The government uses the general army to prevent the mass protest against the social and economical policies of the country. And in the way the importance of the army has increased immensely, and the army personals are demanding more and more assertive in its demands for increasing salaries and other promotional aspects. The Lebanon Government has taken a hands off policy to the aspects of social equality and it is their inability to bridge the gap between the general poor and rich population of the country. The country is dependent on imports for the aspects like energy materials, and food products and these products are generally priced high which make it hard for the poor to buy these products. The bare necessities of life are highly priced and it directly affects the lives of the poor people in Lebanon. It is the main cause that many poor people of the country have been shifted to the other Gulf countries looking for jobs.


In the late 2000s, the World was faced with a global economical crisis, and Lebanon was also a part of the crisis. In the face of the crisis, the banking system of the country had adopted a conservative approach toward banking and the Central Bank had issued strict regulations to protect the country from the economical and subsequent political instabilities. Actually it is because of these regulations that helped these banks based in the country to become unscathed by the financial meltdown. The banks remained high on the aspects of liquidity and their reputation for security increased. At that time the Beirut stock market recorded a growth of 51% and the economy continued its growth, in 2008 8.5% and in 2009 7%. The GDP growth of the country remained steady in 2010 too.

There are several factors that contributed to the growth of the economy of Lebanon, like less expected decline in the exports and steady remittances. The foreign investments in the country increased significantly along with a steady domestic demand. The tourism industry also boomed and the financial sector thrived on the success. The economic growth of the country will continue as the World is slowly recovering from the general financial slowdown. The new government of the country has started a series of different ambitious ventures which will aim the housings, and other different business ventures of the country. The new government policies can be called expansionary with aspects like deregulation and launch of the frozen capital spending will surely impact the economy in a positive way.

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