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Viewing cable 09BEIRUT398, LEBANON: ARAB ECONOMIC FORUM FOCUSES ON LEBANON'S

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Reference ID Created Released Classification Origin
09BEIRUT398 2009-04-06 11:38 2011-08-24 16:30 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Beirut
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 
-------------------- 
 
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