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LEBANON: Protests threaten an already battered economy

07 Dec 2006 13:58:04 GMT
Source: IRIN

BEIRUT, 7 December (IRIN) - With the fatal shooting of a Shi'ite demonstrator, and thousands of Lebanese still camped out in Beirut demanding the creation of a new national unity government, and the resignation of Prime Minister Fouad Siniora, Lebanon is rapidly spiralling into a new economic crisis, according to economists.

Tourism and investor confidence have also been damaged, according to the economy ministry.

"It's too early to make a detailed impact assessment, but we know that the city centre has been completely paralysed by the demonstrations. Demonstrators aren't going to work, and growing political insecurity has struck tourism for the second time in six months," Marwan Mkhayil, adviser to the economy minister, said.

The tourism industry, according to Mkhayil, is the main driving force behind the service sector. It accounts for 25 percent of the economy, which alongside banking constitutes one of the mainstays of the country's highly privatised and service-oriented economy, analysts say.

"It's a cycle. If tourism drops, then not only are the direct beneficiaries. such as hotels and restaurants. going to be affected, but also taxi drivers, and owners of small and medium-sized businesses," said Mkhayil.

"Things were finally starting to look up after the war," said taxi driver Mohamed Khalil. "Now, Beirut has been turned on its head yet again. The thing with Lebanon is you can never enjoy stability for too long - it seems we're cursed. I'm hardly making any money; no one is in the mood to go out."

Alphonse Deeb, economy writer at the pro-government Mustaqbal daily, said 75 percent of tourists and Lebanese foreign nationals who were expected to spend Christmas, New Year and Eid al-Adha in Lebanon had already cancelled their trips just 48 hours into the protests, which began on 1 December.

Deeb said the political instability exacerbated an already fragile economy, damaged by the summer war in Lebanon between Hezbollah and Israel.

"We were expecting 1.6 million tourists, but the war destroyed our hopes to pay off some of Lebanon's debt [estimated at US $40 billion]. Now the situation is even more hopeless. Who now would invest in or visit a country with so much political instability?"

Lebanon's national debt was mostly amassed in the country's huge reconstruction drive following its devastating 15-year civil war between 1975 and 1990. Many protesters, however, said they felt excluded from that economic drive.

According to Samir Makdisi, an economics professor at the American University of Beirut, the ongoing political crisis has also put investors off.

"Essentially, the economy is still functioning but investments into the economy have been delayed," said Makdisi.

Political opposition groups Hezbollah, the Shi'ite Amal party and the Christian Free Patriotic Movement failed to secure the creation of a new government in which the grouping would have a veto over Cabinet decisions. This led to thousands of opposition supporters from across the country holding demonstrations in downtown Beirut aimed at toppling Siniora's pro-Western government.

"Beirut may have been on the rise, but I never benefited from that," said Imran Azoul, who travelled to join the demonstrations in Beirut from Bint Jbeil, one of the towns on Lebanon's southern border with Israel that was devastated by the recent war.

"I am a mechanic, and I make $200 a month. That's not enough to support my family, so it's no big loss for me to be here instead of being at work. I am hoping to put pressure on the government to focus more on developing the country as a whole, not just the banking and tourism sectors, from which I never have and never will benefit," Azoul said.

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Last updated:Thu Dec 7 13:59:01 2006