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Balance of payments deficit widens 130 pct.

Summary: Lebanon's balance of payment deficit increased by more than 130 percent in the first 11 months of 2015 to $3 billion, due to the sharp fall in capital inflows and contraction in the trade deficit, recent statistics showed.

BEIRUT: Lebanon's balance of payment deficit increased by more than 130 percent in the first 11 months of 2015 to $3 billion, due to the sharp fall in capital inflows and contraction in the trade deficit, recent statistics showed.

The balance of payment in the same period of 2014 stood at $1.4 billion. According to the study, foreign trade figures for the first 11 months of 2015 reported a 14.5 percent contraction in the trade deficit relative to the previous year's corresponding period.

"As such, the trade deficit contracted to 27 percent of GDP [a historical low] from 34 percent of GDP in 2014. In dollar terms, the trade deficit was cut by $2.3 billion, moving from $15.8 billion in the first 11 months of 2014 to $13.5 billion in the 2015 corresponding period," a report by Bank Audi said.

The report explained that the decline in the trade deficit over the period did not lead to an improvement in the balance of payments.

"On the contrary, the balance of payments saw its deficit widening from $1.3 billion over the first 11 months of 2014 to $3 billion over the first 11 months of 2015, a record high for Lebanon," Audi said.

It added that the increase in the balance of payments deficit is tied to contracting financial inflows that dropped by 27.4 percent between the two periods.

The drop in the trade deficit in the first 11 months of 2015 relative to the 2014 corresponding period is tied to the 13.9 percent decrease in imports between the two periods, while exports declined by 10.8 percent.

Imports fell from $18.8 billion to $16.2 billion, while exports contracted from $3 billion to $2.7 billion.

The $2.6 billion decline in imports is tied to contracting oil imports within the context of the collapse in crude prices, in addition to the depreciation of major currencies relative to the dollar.

Adjusted for oil prices and exchange rate effects, real imports rose by 8 percent in the first 11 months of 2015 relative to the 2014 corresponding period.

The breakdown of exports by product suggests that the most significant decline was reported by paper and paper products with a decline of 24.6 percent, followed by mineral products with a contraction of 25.6 percent, cement and stones with a decline of 24.2 percent, jewelry with a decrease of 20.4 percent, metals and metal products with a contraction of 15.6 percent, and textile and textile products with a decrease of 13.3 percent.

"These were partly offset by a 7.5 percent rise in chemical products and a 3.3 percent increase in fats and oils. The breakdown by country of destination shows that the most significant decline is recorded by exports to Turkey with a contraction of 50.4 percent, Qatar with 15.1 percent, Iraq with 14.5 percent and Syria with 12.7 percent," Audi said.

The breakdown of imports by product suggests that the most significant decline was reported by mineral products (mainly oil) with a contraction of 37.8 percent, followed by metals and metal products with a decline of 20.3 percent, jewelry with a drop of 18.0 percent, livestock and animal products with a contraction of 15.6 percent, and electrical equipment and products with a drop of 7.3 percent.

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Publication:The Daily Star (Beirut, Lebanon)
Geographic Code:7LEBA
Date:Jan 19, 2016
Words:625
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