Thursday, October 9, 2008

Lebanon, still defying gravity

In 2001, I left Lebanon thinking that a huge crisis was about to hit the country. The economy was not growing, the public deficit to GDP ratio was double digit, debt was 140% of GDP (if I remember well), and the currency was seriously overvalued. Two wars after, the dollar depreciation took care of the last factor (the Lebanese lira is fixed to the dollar) and the economy started growing at about 6% a year (in nominal terms). But the fiscal numbers are as screwed up as ever. The deficit is “only” 6% of GDP (GDP is about $22 billion), but debt reached 200% of GDP and may go to 220% in 2009.

Are people worried? Of course not! Clubs are cooler and more crowded than in New York, property prices are sky-high, and sovereign spreads remain low. Why? The standard answer is that “Lebanon is different.”

Yesterday I bought a wireless router. My sister in law told me that there is no way I will be able to set it up. I told her that I set similar routers up in the US, Italy, and Switzerland. She gave me the standard answer: “Lebanon is different.” Well, after 10 hours of trying I gave up. Lebanon IS different!
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