x Abu Dhabi, UAESaturday 22 July 2017

Explosion fails to rattle markets in Lebanon

The day after a massive explosion from a car bomb tore through Beirut, the Lebanese pound lost all of 0.1 per cent against the US dollar.

The day after a massive explosion from a car bomb tore through Beirut, the Lebanese pound lost all of 0.1 per cent against the US dollar.

Foreign exchange markets, it seemed, had treated the attack with a shrug. The day after the bomb, stock markets were hardly affected. The MSCI Lebanon index fell 0.7 per cent to 144.58 points. Only Lebanon's credit default swaps, which insure a company's or government's debts against missed payments, registered substantial movement, jumping 32 points in trading when markets reopened on Monday to 427 basis points.

Despite this short-term nonchalance from investors, the economic picture looks bleak for Lebanon this year.

"This year there will be no growth. This is the best-case scenario," said Nassib Ghobril, the chief economist at Byblos Bankin Beirut. "First of all you have the impact on consumer confidence, which was already low and investment sentiment that was also already low."

Despite the high-profile nature of the assassination of intelligence chief Brigadier General Wissam Al Hassan - for many analysts the most significant in Lebanon since the 2005 assassination of Rafic Hariri - Lebanon's capital markets were barely shaken in the wake of the blast.

That is partly because many of the brief periods of relative stability during the late 1990s and early 2000s were spent shock-proofing the economy against market tumult following domestic political instability, said Nasser Saidi, formerly the vice-governor of the Central Bank of Lebanon and a minister of economy and trade.

At the time, the central bank took determined steps to ensure that its role in reassuring markets was never in doubt during period of crisis - such as the recent outbreak of political violence.

"They decided to change policy… whenever things like that happened, the central bank was ready to supply whatever the market required," said Mr Saidi.

But with growth stalling, the central bank has few tools at its disposal now, said Simon Neaime, a professor of economics at the American University of Beirut and director of the Institute of Financial Economics.

rjones@thenational.ae

ghunter@thenational.ae