|Banks call on state to spur recovery by rebuilding quickly
|'The losses are obviously massive'
Favorable political developments and a quick decision to rebuild infrastructure may spare Lebanon from an uncertain economic future, despite projections showing that the country's gross domestic product has dropped by 40 percent, leading banks said.
Banque Audi Saradar and Fransabank said in separate reports that although the Israeli war on Lebanon had a devastating impact on the economy, there is still an opportunity to override the immediate negative effects.
Fransabank estimated the direct and indirect losses from the Israeli bombardment at $10-$15 billion.
"At the real sector level, the losses are obviously massive, estimated at no less than 40 percent of the country's GDP under the most conservative estimates," Banque Audi Saradar said in its second quarter report on Lebanon.
Finance Minister Jihad Azour told The Daily Star that Lebanon's public debt may exceed $41 billion at the end of the year, calling for a global approach to the crisis.
The government succeeded in securing around $3 billion in pledges from donor states to rebuild the infrastructure, but Azour and some economist say that Lebanon needs additional funds to service its debt.
The government is likely to seek more than $7 billion in interest-free loans in order to cut the size of debt-servicing and turn the economy around.
The Finance Ministry will revise its economic reform program to suit the needs of the treasury, it said.
The Finance Ministry has lost more than $1.5 billion during the war and blockade.
Apart from the challenges to rebuild the damaged areas, there is growing concern that the tension between Hizbullah and Syria's other allies on one hand and the anti-Syrian camp in the government on the other could further widen the gap between the Lebanese.
The March 14 forces blamed Hizbullah for the 34-day Israeli war on Lebanon after its fighters abducted two Israeli soldiers near the border in order to exchange them for four Lebanese prisoners.
Audi said that the country's overall economic outlook depends on the pace at which a number of political developments are able to secure a sound political environment, supportive for investment, growth and recovery.
"While more tangible signals at this level are yet to be clarified, the investment community has adopted a wait-and-see attitude, and is in need of evaluating the inherent political risks to private investments at large," Audi said.
The bank added that the need to restore a "lost confidence" imposes on Lebanon's political authorities the challenge of promptly agreeing on answers and solutions to all pending issues and sending the right signals to the international investment community.
Fransabank underlined the need to speed up the reconstruction to weather any possible negative effects on the Lebanese economy.
The bank added that reconstruction will help achieve some growth this year if action is taken immediately.
Fransabank said that Lebanon's GDP growth was 2.5 percent through June of this year. The war reversed projections of 5-6 percent growth on the year to projected zero or negative growth, the bank said.
Some contracting companies said Lebanon needs not less than three years of round-the-clock work to rebuild bridges, highways, schools, houses and installations and this means that the construction market will witness the largest growth since 1996.
Prime Minister Fouad Siniora has appointed a leading consultant firm to assess the damages in Lebanon from the war.
Sources said that many donor states insisted on awarding the contracts themselves to ensure transparency and speed of work.
But the industrial and tourist sector are urging the government to extend some help because the losses incurred during the war are beyond the means of the private businesses.
Most bankers say that they can play a big role in stimulating the economy thanks to the large deposits.
Bank deposits fell by 3.6 percent during the war and blockade but all banks believe that the drop can be easily restored in a short period.
The Daily Star