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Banking

Middle East: Lebanese banks hit by Arab Spring

Political unrest damaging Lebanese economy; Banks’ regional growth strategies revised

Political events in Egypt and now Syria are causing Lebanese banks increasing anxiety. More provisions have already been set aside, according to 2010 and first-quarter 2011 results, with a fall-off in the near term unlikely.

A spiral of political violence has most recently begun in neighbouring Syria. Purges in Egypt after the fall of president Hosni Mubarak are also targeting corporations seen as close to the old regime – firms to which many Gulf and Lebanese banks often lend.

Unusually, Lebanon has so far been a haven from civil unrest. But the regional crisis is taking its toll on Lebanon’s trade and tourism. And a more democratic environment in Lebanon has not prevented its political situation deteriorating too: months after the collapse of Saad Hariri’s government, the country has still failed to form a new cabinet.

Syria

As a result of regional and domestic political problems, Lebanon’s previously thriving property market is teetering, with construction permits down and the number of transactions contracting 21% in the first quarter, according to research by Bank Audi. The IMF now expects GDP growth in Lebanon of only 2.5% this year, compared with 7.5% in 2010.

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