2014 Index of Economic Freedom

Lebanon

overall score59.4
world rank96
Rule of Law

Property Rights20.0

Freedom From Corruption24.5

Limited Government

Government Spending73.7

Fiscal Freedom90.9

Regulatory Efficiency

Business Freedom55.6

Labor Freedom58.7

Monetary Freedom74.5

Open Markets

Trade Freedom75.8

Investment Freedom60.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 4.0 million
  • GDP (PPP):
    • $63.2 billion
    • 1.5% growth
    • 5.5% 5-year compound annual growth
    • $15,757 per capita
  • Unemployment:
  • Inflation (CPI):
    • 6.6%
  • FDI Inflow:
    • $3.8 billion
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Lebanon’s economic freedom score is 59.4, making its economy the 96th freest in the 2014 Index. Its score is essentially unchanged from last year, with small improvements in business freedom and labor freedom offset by declines in trade freedom, monetary freedom, and the control of government spending. Lebanon is ranked 9th out of 15 countries in the Middle East/North Africa region, and its overall score is just below the world average.

Over the 19 years during which it has been graded in the Index, Lebanon’s economic freedom score has decreased by nearly 4 points. Modest improvements in four of the 10 economic freedoms, including monetary freedom, investment freedom, and freedom from corruption, have been overwhelmed by substantial declines in property rights, financial freedom, and business freedom. Once considered “moderately free,” Lebanon’s economy has fallen back to “mostly unfree” over the past two years.

Lebanon’s overall entrepreneurial environment is hampered by political instability and regulatory inefficiency. Commercial regulations and bureaucratic red tape are burdensome. Property rights are severely undermined by an inefficient judiciary, which is vulnerable to corruption. Effective implementation of institutional reforms is critical for long-term economic development.

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Background

Since 1975, Lebanon’s economy has been disrupted by civil war, Syrian occupation, Hezbollah clashes with Israel, political uncertainty, and growing 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. In 2006, Lebanon-based Hezbollah forces instigated a conflict with Israel. Hariri’s son, Saad Hariri, was elected prime minister in June 2009, but his government collapsed in January 2011 when Hezbollah engineered the elevation of Najib Mikati as prime minister. Mikati resigned in March 2013, and Tammam Salam was asked to form a caretaker government until new elections, slated for 2014. Economic growth has fallen dramatically.

Rule of LawView Methodology

Property Rights 20.0 Create a Graph using this measurement

Freedom From Corruption 24.5 Create a Graph using this measurement

The sectarian political system and the powerful role of foreign patrons limit the public accountability of elected officials. Political and bureaucratic corruption is widespread, businesses routinely pay bribes and cultivate ties with politicians to win contracts, and anti-corruption laws are enforced only loosely. The judiciary, ostensibly independent, is subject to heavy political influence in practice.

Limited GovernmentView Methodology

The top individual income tax rate is 20 percent, and the top corporate tax rate is 15 percent. Other taxes include a value-added tax (VAT) and an inheritance tax. The overall tax burden equals 17 percent of gross national income. Government spending remains around 30 percent of GDP. Capital flight, political instability, and Syria’s civil war have hurt the budget outlook. Public debt is steady at around 140 percent of the economy.

Regulatory EfficiencyView Methodology

The minimum capital needed to launch a business equals 35 percent of the level of average annual income. Licensing requirements remain time-consuming. The labor market is underdeveloped. The overall fiscal deficit reached 8.7 percent of GDP in 2012, driven by a sharp rise in expenditures stemming from public-sector wages and increased subsidies to the electricity company.

Open MarketsView Methodology

Lebanon’s average tariff rate is 7.1 percent. Non-tariff barriers are not a significant impediment to trade. The legal and regulatory systems are sometimes challenging for foreign investors to navigate. Regional unrest deters investment. The financial sector is relatively well developed for the region. The state retains no ownership in any commercial bank.

Country's Score Over Time

Bar Graph of Lebanon Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Lebanon to other economic country groups

Regional Ranking

rank country overall change
1Bahrain75.1-0.4
2United Arab Emirates71.40.3
3Qatar71.2-0.1
4Jordan69.2-1.2
5Israel68.41.5
6Oman67.4-0.7
7Kuwait62.3-0.8
8Saudi Arabia62.21.6
9Lebanon59.4-0.1
10Morocco58.3-1.3
11Tunisia57.30.3
12Yemen55.5-0.4
13Egypt52.9-1.9
14Algeria50.81.2
15Iran40.3-2.9


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