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- GDP (PPP):
- $81.1 billion
- 2.0% growth
- 3.2% 5-year compound annual growth
- $17,986 per capita
- Inflation (CPI):
- FDI Inflow:
The Lebanese economy remains fragile. Regulatory inefficiency and uncertainty exacerbated by political instability and ongoing security threats by violent extremists continue to undermine private-sector activity and development. Government bureaucracy and the lack of transparency perpetuate an environment hostile to investors.
Economic Freedom Snapshot
- 2016 Economic Freedom Score: 59.5 (up 0.2 point)
- Economic Freedom Status: Mostly Unfree
- Global Ranking: 98th
- Regional Ranking: 10th in the Middle East/North Africa Region
- Notable Successes: Trade Freedom and Monetary Freedom
- Concerns: Rule of Law and Regulatory Efficiency
- Overall Score Change Since 2012: –0.6
The ongoing threat of strikes and the recent waste-management crisis underline the gravity of Lebanon’s financial and political problems. Systemic weaknesses persist in the protection of property rights and effective enforcement of anti-corruption measures. The judiciary remains vulnerable to political influence.
Since 1975, Lebanon has been destabilized by civil war, Syrian occupation, Hezbollah clashes with Israel, political uncertainty, and sectarian tensions. Syria was forced to withdraw its army in 2005 after its government was implicated in the assassination of former Lebanese Prime Minister Rafiq Hariri. After a period of political deadlock, Prime Minister Tammam Salam, a Sunni, was able to form a government in 2014, but violence and instability are increasing. Sectarian divides hinder political cooperation on key government appointments and substantive policy issues. Parliamentary elections have been postponed repeatedly after members were unable to agree on a new electoral law. The civil war in neighboring Syria has severely hampered economic growth. Once a leading regional center for finance and tourism, Lebanon’s economy has fallen on hard times.
Proximity to the worsening Syrian crisis has aggravated the political instability caused in part by rampant corruption in Lebanon’s public sector. The sectarian political system and the actions of foreign patrons effectively limit elected officials’ accountability to the public. The judicial system is in need of root-and-branch reform to change both its procedures and many of its junior, middle-ranking, and senior personnel.
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 15.5 percent of total domestic income. Government spending amounts to 28.5 percent of total domestic output. The deficit has been over 5 percent of GDP, and public debt exceeds annual economic output.
The entrepreneurial framework lacks transparency and efficiency. The cost of completing licensing requirements equals over three times the average annual income. The rigid labor market is stagnant. Although government transfers to the loss-making, state-owned Electricite du Liban power utility dropped by 40 percent in 2015 as a byproduct of weaker oil prices, the IMF has called for additional subsidy cuts.
Lebanon’s average tariff rate is 7.1 percent. State-owned enterprises are active in many sectors, including electricity and telecommunications. In general, foreign and domestic investors are treated equally under the law. Banking is relatively well developed for the region. The state retains no ownership in any commercial banks. Because of Lebanon’s ongoing political insecurity, the financial sector is under increasing strain.