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Identifier
Created
Classification
Origin
09BEIRUT398
2009-04-06 11:38:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Beirut
Cable title:  

LEBANON: ARAB ECONOMIC FORUM FOCUSES ON LEBANON'S

Tags:   ECON  EFIN  PGOV  LE 
pdf how-to read a cable
VZCZCXRO0394
RR RUEHAG RUEHBC RUEHDE RUEHDF RUEHIK RUEHKUK RUEHLZ RUEHROV RUEHSR
DE RUEHLB #0398/01 0961138
ZNR UUUUU ZZH
R 061138Z APR 09
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE WASHDC 4597
INFO RUEHEE/ARAB LEAGUE COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RHEHAAA/NSC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC
						UNCLAS SECTION 01 OF 02 BEIRUT 000398 

SENSITIVE

SIPDIS

STATE FOR NEA/ELA AND EEB/IFD/ODF
STATE PASS USTR FRANCESCKI
STATE PASS USAID LAUDATO/SCOTT
TREASURY FOR PARODI/BLEIWEISS/CORREA
USDOC FOR 4520/ITA/MAC/ONE
NSC FOR MCDERMOTT

E.O. 12958: N/A
TAGS: ECON EFIN PGOV LE
SUBJECT: LEBANON: ARAB ECONOMIC FORUM FOCUSES ON LEBANON'S
RESILIENCE (ECONOMIC WEEK IN REVIEW, MARCH 30 - APRIL 5, 2009)

CONTENTS
--------

-- ARAB ECONOMIC FORUM FOCUSES ON GLOBAL CRISIS,
LEBANON'S ECONOMIC RESILIENCE
-- ACTIVITY AGAINST MONEY LAUNDERING AND TERROR FINANCE INCREASES IN
2008
-- S&P: LEBANON MOST AT RISK IN MENA REGION FROM DROP IN
REMITTANCES
-- WORLD BANK REVISES ITS PROJECTION FOR 2009 MENA REMITTANCES
INLFOWS
-- MOODY'S UPGRADES LEBANON'S BOND RATINGS, BUT REMAINS CAUTIOUS
-- DELTA AIRLINES TO OPEN FIRST OFFICE IN LEBANON


ARAB ECONOMIC FORUM FOCUSES ON GLOBAL CRISIS,
LEBANON'S ECONOMIC RESILIENCE
--------------------

UNCLAS SECTION 01 OF 02 BEIRUT 000398

SENSITIVE

SIPDIS

STATE FOR NEA/ELA AND EEB/IFD/ODF
STATE PASS USTR FRANCESCKI
STATE PASS USAID LAUDATO/SCOTT
TREASURY FOR PARODI/BLEIWEISS/CORREA
USDOC FOR 4520/ITA/MAC/ONE
NSC FOR MCDERMOTT

E.O. 12958: N/A
TAGS: ECON EFIN PGOV LE
SUBJECT: LEBANON: ARAB ECONOMIC FORUM FOCUSES ON LEBANON'S
RESILIENCE (ECONOMIC WEEK IN REVIEW, MARCH 30 - APRIL 5, 2009)

CONTENTS
--------------

-- ARAB ECONOMIC FORUM FOCUSES ON GLOBAL CRISIS,
LEBANON'S ECONOMIC RESILIENCE
-- ACTIVITY AGAINST MONEY LAUNDERING AND TERROR FINANCE INCREASES IN
2008
-- S&P: LEBANON MOST AT RISK IN MENA REGION FROM DROP IN
REMITTANCES
-- WORLD BANK REVISES ITS PROJECTION FOR 2009 MENA REMITTANCES
INLFOWS
-- MOODY'S UPGRADES LEBANON'S BOND RATINGS, BUT REMAINS CAUTIOUS
-- DELTA AIRLINES TO OPEN FIRST OFFICE IN LEBANON


ARAB ECONOMIC FORUM FOCUSES ON GLOBAL CRISIS,
LEBANON'S ECONOMIC RESILIENCE
--------------


1. (U) On April 2, the 17th annual Arab Economic Forum opened in
Beirut. Speakers included PM Siniora, Future Party Leader Saad
Hariri, Central Bank Governor Riad Salameh, and several prominent
business and financial figures. Their remarks focused on the
repercussions of the global economic crisis in the Arab region, the
need for increased inter-Arab economic cooperation, economic reform,
and reviving efforts to establish an Arab Common Market. Chairman
of the Association of Banks in Lebanon (ABL) Francois Bassil noted
that while Arab oil-exporting countries could rely on their
governments to help them face the crisis, the rest of the Arab
world, including Lebanon, needed to rely on the private sector to
boost economic growth and attract investment.


2. (U) All speakers agreed that Lebanon has not yet been affected by
the crisis. Central Bank of Lebanon (CBL) Governor Riad Salameh
noted that CBL foreign currency assets reached over $21 billion
(excluding gold reserves and other assets), which is a source of
confidence, ensuring the stability of the Lebanese pound and
interest rates. Salameh expected economic growth of around four
percent in 2009, an increase in bank deposits of between seven and
ten percent, and inflation under four percent. Dollarization of
deposits is also expected to decline further from its current rate
of 68%.


ACTIVITY AGAINST MONEY LAUNDERING AND
TERROR FINANCE INCREASES IN 2008
--------------


3. (SBU) Ibrahim Homsy, Senior Director at the Special Investigation
Commission (SIC) fighting money laundering and terrorism finance,
Lebanon's financial intelligence unit, told us April 3 that the SIC
received 226 cases for investigation and inquiry in 2008, of which
11 cases originated from USG requests covering suspected money
laundering operations and terrorism finance. Out of the 226 cases
received, the SIC investigated 201 cases, transferring 67 of them to
the judicial authorities. In 2007, the SIC investigated 191 cases
of money laundering and illegal financial activities, Homsy said.
The SIC will post its 2008 annual report on www.sic.gov.lb

S&P: LEBANON MOST AT RISK IN MENA REGION
FROM DROP IN REMITTANCES
--------------


4. (U) In a March 30 report, Standard & Poor's (S&P) said that a
significant decline in expatriates' remittances to Lebanon would
hurt its current account balance more than that of other
remittance-dependent economies in the MENA region. S&P noted
remittances account for 27% of Lebanon's current account receipts,
the highest such share in the region. While S&P did not predict how
big a decline in remittances MENA countries would face, it presented
various scenarios and outlined their consequences on the
remittance-dependent economies. Under its base-case scenario, S&P
said a decline of between 5% and 10% in remittance inflows to
Lebanon in 2009 would result in a current account deficit of 10% of
GDP. The report's stress tests indicate that a 50% contraction in
remittance inflows would result in a current account deficit of 19%
of GDP for 2009, the largest such deterioration in the MENA region.
S&P noted that its credit ratings on Lebanon already incorporate its
assessment of the country's precarious external balances.


BEIRUT 00000398 002 OF 002


WORLD BANK REVISES ITS PROJECTION
FOR 2009 MENA REMITTANCES INLFOWS
--------------


5. (U) In parallel, the World Bank (WB) revised its 2009 projections
for remittance inflows to the MENA region, with inflows contracting
by 1.4% in a base-case scenario and by 5.2% in a worst-case
scenario, compared to previous forecasts of 6.7% and 13.2%. The WB
attributed the revised forecasts to expectations that remittances
from Gulf Cooperation Council (GCC) countries would show a smaller
economic decline of 3%, compared to its previous estimate of a 9%
contraction. Many GCC countries are following a long-term
infrastructure development strategy funded from accumulated reserves
and are unlikely to low down infrastructure spending and lay off
migant workers in large numbers. Although there are n official
estimates, anecdotal evidence suggests that around 300,000 Lebanese
work in GCC countries.

MOODY'S UPGRADES LEBANON'S BOND
RATINGS, BUT REMAINS CAUTIOUS
--------------


6. (U) Moody's Investor Service upgraded Lebanon's local and foreign
government bond rating to B2 from B3, foreign currency bank deposits
to B2 from B3, and foreign currency bonds to B1 from B2. According
to Moody's, these upgrades come after the substantial improvement in
external liquidity, the proven resilience of public finances towards
shocks, and the willingness and ability of Lebanon's banking system
to finance the country's debt. However, Moody's is still cautious
about the fragility and the vulnerability of the Lebanese political
and economic situation, which continue to limit the possibility of a
substantial improvement in credit ratings for Lebanon.

DELTA AIRLINES WILL OPEN ITS
FIRST OFFICE IN LEBANON
--------------


7. (SBU) Delta Airlines will open its first office in Lebanon on
April 27. Robert Nakhl, General Manager of Delta Airlines in
Lebanon, told Commercial staff on April 3 that the volume of travel
between Lebanon and the U.S. is estimated at $41 million each year.
Delta Airlines will be competing in the Lebanese market with United,
Continental, and American Airlines, all of which already have a
presence in Lebanon.

SISON