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Exploring Lebanon's growth prospects
 
Author:Berthelemy, Jean-Claude; Dessus, Sebastien; Nahas, Charbel ; Collection Title:Policy Research working paper ; no. WPS 4332
Country:Lebanon; Date Stored:2007/08/27
Document Date:2007/08/01Document Type:Policy Research Working Paper
SubTopics:Access to Finance; Economic Theory & Research; Emerging Markets; Debt Markets; Language:English
Region:Middle East and North AfricaReport Number:WPS4332
Volume No:1 of 1  

Summary: 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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