2013 Index of Economic Freedom

Lebanon

overall score59.5
world rank91
Rule of Law

Property Rights20.0

Freedom From Corruption25.0

Limited Government

Government Spending74.6

Fiscal Freedom90.8

Regulatory Efficiency

Business Freedom50.3

Labor Freedom57.2

Monetary Freedom76.5

Open Markets

Trade Freedom80.4

Investment Freedom60.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 4.0 million
  • GDP (PPP):
    • $61.4 billion
    • 1.5% growth
    • 6.7% 5-year compound annual growth
    • $15,523 per capita
  • Unemployment:
  • Inflation (CPI):
    • 5.0%
  • FDI Inflow:
    • $3.2 billion
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Lebanon’s economic freedom score is 59.5, making its economy the 91st freest in the 2013 Index. Its score has decreased by 0.6 point since last year, primarily due to declines in property rights, business freedom, and labor freedom. Lebanon is ranked 10th out of 15 countries in the Middle East/North Africa region, and its overall score is just below the world average.

The Lebanese economy has registered fragile progress toward greater economic freedom over the past five years. Regulatory inefficiency, exacerbated by political volatility, curbs private-sector development. Despite some improvement in streamlining business formation, government bureaucracy and the lack of transparency create a poor entrepreneurial climate.

Implementation of deeper institutional reforms to improve the foundations of economic freedom is critical to Lebanon’s prospects for long-term economic development and greater poverty reduction. Systemic weaknesses persist in the protection of property rights and effective enforcement of anti-corruption measures. The judiciary remains vulnerable to political influence.

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Background

Lebanon’s economy has been severely disrupted since 1975 by civil war and Syrian occupation. 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. Other factions supported by Syria and Iran also tried to destabilize the government. Hariri’s son, Saad Hariri, was elected prime minister in June 2009 and in November was forced by Syria to form a national unity government that included Hezbollah. That government collapsed in January 2011 when Hezbollah withdrew and engineered the elevation of Najib Mikati as prime minister. Lebanon’s economy was virtually destroyed by 15 years of war and occupation. Political uncertainty at home and popular unrest in neighboring Syria have slowed recovery significantly.

Rule of LawView Methodology

Property Rights 20.0 Create a Graph using this measurement

Freedom From Corruption 25.0 Create a Graph using this measurement

The judiciary is weak and vulnerable to political interference. The government-appointed prosecuting magistrate exerts considerable influence on judges. Trials, particularly of commercial cases, drag on for years. Lebanese law provides for some protection of intellectual property rights, but piracy remains a significant problem. Rampant corruption is aggravated by sectarian ruptures that are exacerbated by conflict in neighboring Syria.

Limited GovernmentView Methodology

The top 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 is equivalent to 17.2 percent of total domestic income. Government spending accounts for 29.1 percent of total domestic output. The deficit equals 5.6 percent of GDP, and public debt exceeds the size of the economy.

Regulatory EfficiencyView Methodology

The entrepreneurial framework lacks transparency and efficiency. Completing licensing requirements takes more than 200 days and costs over three times the level of average annual income. Bankruptcy procedures remain burdensome and costly. The rigid labor market is stagnant. The government influences prices through state-owned enterprises and directly controls the prices of key products. Monetary stability is weak.

Open MarketsView Methodology

The trade-weighted average tariff rate is 4.8 percent. The trade system is relatively open, and efforts to join the World Trade Organization are progressing. Political instability and the arbitrary and non-transparent interpretation of laws continue to impede foreign investment. The financial sector is relatively well developed for the region. The state retains no ownership in any commercial banks.

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
1Bahrain75.50.3
2Qatar71.30.0
3United Arab Emirates71.11.8
4Jordan70.40.5
5Oman68.10.2
6Israel66.9-0.9
7Kuwait63.10.6
8Saudi Arabia60.6-1.9
9Morocco59.6-0.6
10Lebanon59.5-0.6
11Tunisia57-1.6
12Yemen55.90.6
13Egypt54.8-3.1
14Algeria49.6-1.4
15Iran43.20.9


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