The Royal Bank of Scotland (RBS) predicted that Lebanese economic growth will slow to approximately 5 percent in 2011. This is a drop from the average growth rate of 8 percent last year.
RBS said that the tourism, financial services, construction and housing sectors have been the growth leaders. However, due to political developments the growth rate is likely to decline. RBS predicts that the fiscal deficit will continue to remain high.
RBS indicated that a continued lack of a government may delay government spending and investment, which is presently planned at 3.5 percent of GDP for 2011.
It emphasized that the main issue on the policy front is what happens when the term of Central Bank Governor Riad Salameh ends in July, 2011. RBS said that Salameh has developed tremendous credibility since he took office in 1993. He would probably receive another term since he has successfully directed Lebanon during very difficult financial periods; he is considered politically neutral and lacks any realistic challengers.