Lebanon Economy at Risk from Syria Unrest: IMF

The Lebanese economy is at risk from internal political uncertainty, spiraling violence in neighboring Syria and the Eurozone crisis, the International Monetary Fund has warned.

These and other vulnerabilities including high government debt and an ongoing current account deficit saw gross domestic product (GDP) growth sink to an estimated 1.5 percent last year from 7.0 percent in 2010, said the IMF.

The IMF issued the projection in a statement late Thursday following talks with the Lebanese authorities on January 23.

"Directors noted that downside risks are high due to the uprising in Syria, the uncertain outlook for the region, and the financial crisis in Europe," said the statement.

"Also, underlying vulnerabilities remain large, especially those stemming from the high government debt and the continuing current account deficit."

The Fund said however that GDP growth in the Middle East country would recover slightly this year, with expansion of 3.5 percent.

"Executive directors noted that domestic political uncertainty and regional unrest eroded market confidence in 2011, bringing an end to Lebanon's four-year spell of impressive economic growth," said the IMF statement.

"They commended the authorities for skillfully managing the downturn using buffers built during the upswing."

The IMF urged Lebanese authorities to instill confidence and preserve macroeconomic stability while generating sustained growth and reducing vulnerabilities in the near to medium term.

It called for fiscal discipline and contingency measures against any downside risks while targeting a significant reduction in the dept to GDP ratio.

"Directors recommended that the authorities implement a medium term strategy that aims at sustained, broad based growth and employment generation," said the IMF.

"This would require launching long delayed reforms to develop the infrastructure, improve the business climate, and remove labor market inefficiencies."

Lebanon's ratio of debt to GDP is one of the highest in the world. According to the IMF's latest estimate, debt stood at 134 percent of GDP last year, down from 137 percent in 2010 and 146 percent in 2009.