VZCZCXRO6742
RR RUEHAG RUEHBC RUEHDE RUEHDF RUEHIK RUEHKUK RUEHLZ RUEHROV RUEHSR
DE RUEHLB #1798/01 3651011
ZNR UUUUU ZZH
R 301011Z DEC 08
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE WASHDC 3867
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 001798 
 
SENSITIVE 
 
SIPDIS 
 
STATE FOR NEA/ELA 
STATE PASS USTR FRANCESCKI 
STATE PASS USAID BEVER/LAUDATO/SCOTT 
TREASURY FOR MNUGENT AND SBLEIWEISS 
USDOC FOR 4520/ITA/MAC/ONE 
NSC FOR ABRAMS/RAMCHAND/YERGER/MCDERMOTT 
 
E.O. 12958: N/A 
TAGS: ECON EFIN PREL PGOV LE
SUBJECT: LEBANON:  CENTRAL BANK GOVERNOR PROJECTS HIGHER DEFICIT AND 
INFLATION IN 2009 (ECONOMIC WEEK IN REVIEW, DECEMBER 22 - 24, 2008) 
 
CONTENTS 
-------- 
 
-- CENTRAL BANK GOVERNOR PROJECTS HIGHER DEFICIT AND INFLATION IN 
2009 
-- ECONOMIC ACTIVITY UP DURING END OF YEAR HOLIDAYS; REAL ESTATE 
MARKET UNAFFECTED BY GLOBAL CRISIS 
-- FINANCE MINISTER SIGNS $85 MILLION SOFT LOAN FROM ARAB MONETARY 
FUND 
-- WORLD BANK: REAL SECTOR WILL BE HIT BY GLOBAL CRISIS, GDP TO 
DECREASE IN 2009 
-- AUCTION FOR CELLULAR VANITY NUMBERS RAISES OVER $700,000 
-- MOODY'S REVISES OUTLOOK OF FOUR LEBANESE BANKS 
 
 
CENTRAL BANK GOVERNOR PROJECTS HIGHER 
DEFICIT AND INFLATION IN 2009 
-------------------- 
 
¶1. (U) In a televised interview on December 21, Central Bank of 
Lebanon (CBL) Governor Riad Salameh said the deficit will reach 
$2.66 billion in 2009, and will further grow by ten percent as a 
result of the recently approved salary increases in the public 
sector.  He also indicated that inflation will be higher than 
projected earlier (six percent), and will range between eight and 
ten percent, due to higher liquidity in the market resulting from 
salary increases and the drop in oil prices.  However, Salameh said 
the CBL has record high foreign currency assets (excluding gold) 
exceeding $19 billion, and the CBL is buying dollars from the market 
daily, thus increasing its ability to maintain a stable local 
currency.  He also noted that surplus in subscriptions in Treasury 
Bills and sovereign paper will enable the GOL to cover maturities in 
¶2009. 
 
ECONOMIC ACTIVITY UP DURING END OF YEAR HOLIDAYS; 
REAL ESTATE MARKET UNAFFECTED BY GLOBAL CRISIS 
-------------------- 
 
¶2. (U) On December 22, economic editorialist in moderate anti-Syrian 
An-Nahar Sabine Oueiss reported that for the first time since 2005, 
economic indicators showed increased economic activity in December 
2008 due to the end of year holiday season.  Flight bookings to 
Lebanon from all destinations are full.  Hotel occupancy reached a 
record 100 percent in Beirut during the end of December, according 
to Tourism Ministry Director General Nada Sardouk, and recorded an 
average of 70-90 percent all over Lebanon, Oueiss said.  Commercial 
activity has also picked up with an estimated increase in sales of 
40 percent.  PM Siniora recently estimated that growth could reach 
seven percent in 2008, Oueiss noted. 
 
¶3. (U) Meanwhile, Oueiss said the local real estate market will not 
be affected by the global crisis at the present time, because demand 
continues to exceed supply and prices have not dropped, according to 
real estate experts.  Prices of apartments rose by 40 percent in the 
first half of 2008, following an annual increase of 30 percent over 
the last three years, the report indicated, adding that experts 
consider prices to be currently in a correction phase, anticipating 
a drop in apartments' prices between ten and 20 percent due to the 
drop in the prices of construction materials and the Euro. 
Moreover, the report indicated that the increase in demand from the 
Lebanese Diaspora for property acquisition, which comprises 80 
percent of total demand, versus a drop in demand from Gulf 
investors, has maintained real estate market stability as Gulf 
investors may pull out from the market due to a liquidity squeeze. 
 
FINANCE MINISTER SIGNS $85 MILLION 
SOFT LOAN FROM ARAB MONETARY FUND 
-------------------- 
 
¶4. (SBU) On December 22, Minister of Finance (MOF) Mohammad Chatah 
and Arab Monetary Fund (AMF) President Jassem Al-Manaai signed an 
$85 million soft loan under a budgetary support to help countries 
importing oil scheme, MOF senior economic officer Huda Saigh told 
us.  This assistance is part of AMF's Paris III pledges to provide 
Lebanon with $150 million in loans for budgetary support.  Last 
year, the MOF signed a 
$32 million loan agreement with the AMF for structural adjustment 
and fiscal reforms, and a $43 million loan for risk mitigation and 
accounting project with the Central Bank.  All these loans need to 
 
BEIRUT 00001798  002 OF 002 
 
 
be approved by Parliament. 
 
¶5. (SBU) According to Saigh, this is the first time that the AMF is 
extending budgetary support under this scheme to Lebanon.  She noted 
that Lebanon continues to benefit from revolving credit lines for 
fuel imports under AMF's Arab Trade Financing Program.  The AMF also 
pledged a $100 million loan for private sector support at Paris III, 
which has been entirely disbursed, Saigh said. 
 
WORLD BANK: REAL SECTOR WILL BE HIT BY GLOBAL 
CRISIS, GDP TO DECREASE IN 2009 
-------------------- 
 
¶6. (U) According to the World Bank's (WB) latest Global Economic 
Prospects 2009 report, Lebanon's real sector (industry, trade) is 
expected to be affected by the repercussions of the global financial 
crisis.  This comes in contrast to the banking sector, which has 
still not displayed signs of contagion.  The real economic slowdown 
will lead to a drop in Lebanon's GDP from 5.5 percent in 2008, to 
four percent in 2009. 
 
AUCTION FOR CELLULAR VANITY 
NUMBERS RAISES OVER $700,000 
-------------------- 
 
¶7. (U) On December 22, Alfa, the cellular company currently managed 
by the Ministry of Telecommunications (MOT), raised $710,000 from 
the auction of 50 vanity numbers, bringing additional revenues to 
the Treasury.  Last October, the MOT collected $2.5 million from the 
auction of 30 vanity numbers.  Minister of Telecommunications Gebran 
Bassil restated the MOT's intention to use the revenues from the 
first auction to improve the network, saying that the signing of 
contracts for this purpose are about to be signed, and work will 
start at the beginning of next year, Bassil said. 
 
MOODY'S REVISES OUTLOOK 
OF FOUR LEBANESE BANKS 
-------------------- 
 
¶8. (U) Moody's Investors Service revised the outlook to positive 
from stable on the B3 long-term foreign currency deposit rating of 
Byblos Bank, BLOM Bank, Bank Audi, and Bank of Beirut.  This comes 
days after Moody's raised its outlook on Lebanon's sovereign ratings 
to positive from stable. 
 
SISON