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Exploring Lebanon's growth prospects

  • Berthelemy, Jean-Claude
  • Dessus, Sebastien
  • Nahas, Charbel

This paper attempts to identify Lebanon's greatest constraints to economic growth, following a growth diagnosis approach. It concludes that fiscal imbalances and barriers to entry are most binding on long-term growth. Macroeconomic imbalances and related perceived risks affect the nature of investment decisions in Lebanon, in favor of liquid instruments rather than longer-term productive investments. Further, many barriers to entry discourage agents from investing in a number of markets: legal impediments to competition, corruption, and a set of fiscal incentives favoring the allocation of resources to non-tradable sectors, where potential demand and investment opportunities are scarcer. In turn, using a steady-state computable general equilibrium model, the paper assesses the long-term growth impact of a selected set of policy reforms envisaged to lift such constraints. Results suggest that 1 to 2 percentage points of additional GDP growth per year could be gained through public expenditure reform, greater domestic competition, and tax harmonization.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4332.

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Date of creation: 01 Aug 2007
Date of revision:
Handle: RePEc:wbk:wbrwps:4332
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