Influx of Syrian Refugees Neither Boom Nor Bust for Lebanese Market

Shoppers in the Hamra district of Beirut. (Photo: Marwan Bu Haidar)

By: Hassan Chakrani

Published Wednesday, January 30, 2013

A preliminary survey conducted by a mission of the International Monetary Fund (IMF) to Lebanon at the end of 2012 has established that the impact of the Syrian refugees on the country’s economy during the past two years was positive, counterbalancing the adverse repercussions of the Syrian crisis.

According to one economist who was able to examine the conclusions of the mission, “The Syrian refugees, particularly middle to high-income segments, have offset the negative effects of the crisis, and have even had a positive effect [on the economy] to some extent.”

There is no doubt that the wave of displaced Syrians has generated additional demand in the local market, not only in the housing sector, but also for all other goods and services, including schools and healthcare.

For the record, the housing price index in Lebanon – the second most important component of the consumer price index – rose by a whopping 44 percent in December 2012 compared to the same month of the previous year. If anything, this reflects strong demand amid the downturn in the real estate market.

It should be stressed that not all refugees are living in luxury hotels; many live in tents or sleep in the open, even during the harsh winter.

At any rate, the IMF stated in its most recent report on the Middle East and North Africa, released in November 2012: “The conflict in Syria has escalated into a civil war since April 2012, and is now a humanitarian crisis with increasingly significant regional spillovers, especially for Iraq, Jordan, and Lebanon.”

It would seem that the findings of the latest IMF mission, which may appear in its comprehensive report on Lebanon to be issued soon, temper this outlook. Contrary to the prevailing belief, Lebanon was found to be in a relatively good macroeconomic position.

Economists familiar with the IMF research and general macroeconomic conditions confirm that growth in 2012 stood at around 2 percent. This is an acceptable figure considering the level of risk in and around Lebanon.

“Of course, it could have been possible for Lebanon to grow by 8 percent, on par with previous years, by exploiting its untapped capabilities,” one prominent banker proclaimed.

Here, another economist familiar with the IMF study asked, “What is the difference between 2 and 4 percent if the economy is underperforming amid all this polarization?”

The expert confirmed that Lebanon’s economic ties with Syria were never truly outstanding. For one thing, he said, these ties do not revolve around direct trade, but more so transit for people and goods, or at best, procuring labor for traditional Lebanese sectors.

In normal circumstances, there would be about 670,000 Syrian workers in Lebanon on a year-to-year basis. These workers remain present in Lebanon, and the Syrian crisis does not seem to have affected them dramatically.

As for trade between the two countries, official numbers show it to be no more than 4 percent of the GDP at best. In 2012, declared Lebanese imports to, and exports from, Syria did not exceed 1 percent of the GDP. A large proportion of the actual trade remains off the record as it takes place through smuggling via unofficial border crossings.

Concerning capital flow between Lebanon and Syria, the banker who spoke to Al-Akhbar stated that deposits in Syria did not exceed $30 billion in value before the conflict, third of which was held by state-controlled banks, which are subject to the regime's policies. Furthermore, a third of these deposits were held in Syrian pounds.

One problem that has arisen from the Syrian crisis concerns land passenger transit. Nearly 40 percent of Lebanon’s tourist arrivals typically arrive through Syrian territory via Jordan, Iraq, or even Gulf countries. As a result of current security risks, these arrivals have declined by about 17 percent in 2012, down to 1.36 million tourists, the lowest level recorded since 2008.

Generally speaking, the Lebanese economy has been able to withstand the Syrian crisis. In 2012, Lebanese imports grew by almost 6 percent to $21.28 billion. True, the imports of investment goods fell by 0.1 percent due to declining investments, but imports of consumer goods rose by 8.4 percent to meet growing demand in an economy where consumption accounts for nearly 80 percent of overall economic activity. More significantly, exports grew by 5 percent to $4.48 billion.

The Lebanese economy is not exactly flourishing, but it’s certainly not in horrible shape.

This article is an edited translation from the Arabic Edition.

Comments

Tourism might have problems considering the crysis. But consider that there is a large number of organizations including UN agencies, ECHO and other Donors funding support to asylum seekers. Personally, for a project I am managing, I have bought already almost 700 mattresses, 1000 blankets, 240 oil stoves, oil fuel for the heaters (something like 12 thousand dollars already spent), materials to close windows for almost 70 thousand dollars, paid already works for sanitation for around 15 thousand dollars and clothing for near 13 thousand dollars.. all from local markets and giving work to local enterprises. Add that syrian asylum seekers are charged with sometime awful prices from lebanese landlords very often without regular contracts and for impossible shelters (you should report also on this...).
There is also an impact on local market for work since we all recruit local staff. And consider that syrians of the upper classes are not included... since they are wealthy.

It's not strange that the Lebanese economy grew because of refugees. Some of them probably find work and do some shopping. However, some of them may steal and this can result in higher crime rate.

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