2017 Index of Economic Freedom

Lebanon

overall score53.3
world rank137
Rule of Law

Property Rights43.8

Government Integrity23.3

Judicial Effectiveness25.3

Government Size

Government Spending76.1

Tax Burden91.8

Fiscal Health0.0

Regulatory Efficiency

Business Freedom51.5

Labor Freedom49.5

Monetary Freedom78.4

Open Markets

Trade Freedom84.4

Investment Freedom65.0

Financial Freedom50.0

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Quick Facts
  • Population:
    • 4.6 million
  • GDP (PPP):
    • $83.1 billion
    • 1.0% growth
    • 1.8% 5-year compound annual growth
    • $18,240 per capita
  • Unemployment:
    • 7.1%
  • Inflation (CPI):
    • -3.7%
  • FDI Inflow:
    • $2.3 billion
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Lebanon was once a leading regional center for finance and tourism, but its economy has fallen on hard times. The investment climate is undermined by political instability and continuing turmoil in Syria, rising sectarian tensions, and terrorism. The destabilizing spillover effects of the Syrian civil war, including the influx of over a million registered Syrian refugees, has had a negative impact on economic growth.

The fiscal deficit continues to be substantial, with reduced assistance from the Gulf countries complicating near-term financial management. The increasingly burdensome cost of debt service accounts for over one-third of public spending.

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Background

Lebanon has been destabilized since 1975 by civil war, Syrian occupation, and clashes between Israel and the powerful Shia Islamist group, Hezbollah, which is backed by Iran. Syria withdrew its army in 2005 after its government was implicated in the assassination of former Lebanese Prime Minister Rafiq Hariri. These sectarian tensions have led to complex power-sharing arrangements that hinder political cooperation on key government appointments and substantive policy issues. The Sunni-dominated Future Movement blocked the election by Lebanon’s parliament of Michel Aoun, an 81-year-old former army general and Maronite Christian, as president for two years, until late October 2016. President Aoun was backed by Hezbollah.

Rule of LawView Methodology

Property Rights 43.8 Create a Graph using this measurement

Government Integrity 23.3 Create a Graph using this measurement

Judicial Effectiveness 25.3 Create a Graph using this measurement

Lebanon has made transferring property more complex by increasing the time required for property registration. Political forces hold sway over an officially independent judiciary. The Supreme Judicial Council is composed of 10 judges, eight of whom are nominated by the president and the cabinet. Corruption is reportedly pervasive in government contracts (primarily in procurement and public works) and in taxation and real estate registration.

Government SizeView Methodology

The top personal income tax rate is 20 percent, and the top corporate tax rate is 15 percent. Other taxes include a value-added tax and an inheritance tax. The overall tax burden equals 13.8 percent of total domestic income. Government spending has amounted to 28.2 percent of total output (GDP) over the past three years, and budget deficits have averaged 7.9 percent of GDP. Public debt is equivalent to 139.1 percent of GDP.

Regulatory EfficiencyView Methodology

The overall freedom to establish and run a business remains limited by the poor regulatory environment. The cost of starting a business and completing licensing requirements is high. The labor market, undermined by political instability, continues to be stagnant. Although annual government transfers to the unprofitable state-owned power utility consume 15 percent of the budget, Lebanon continues to suffer from pervasive blackouts.

Open MarketsView Methodology

Trade is extremely important to Lebanon’s economy; the value of exports and imports taken together equals 122 percent of GDP. The average applied tariff rate is 2.8 percent. State-owned enterprises distort the economy, and the regulatory and judicial systems discourage foreign investment. Lebanon’s financial sector used to be a regional hub, but ongoing political insecurity has subjected it to massive uncertainty and strain.

Country's Score Over Time

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Regional Ranking

rank country overall change
1United Arab Emirates76.94.3
2Qatar73.12.4
3Israel69.7-1.0
4Bahrain68.5-5.8
5Jordan66.7-1.6
6Kuwait65.12.4
7Saudi Arabia64.42.3
8Oman62.1-5.0
9Morocco61.50.2
10Tunisia55.7-1.9
11Lebanon53.3-6.2
12Egypt52.6-3.4
13Iran50.57.0
14Algeria46.5-3.6


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