BMI Risk Ratings ... 5
BMI Risk Ratings – Lebanon..6
BMI Risk Ratings – Syria....7
BMI Risk Ratings – Middle East Tables.... 8
Executive Summary – Lebanon. 11
Core Views ....11
Major Forecast Changes ..11
Key Risks To Outlook ..11
Chapter 1.1: Political Outlook – Lebanon. 13
SWOT Analysis..... 13
Domestic Politics..... 14
Crisis Averted, But Stability Still Elusive....14
We have little reason to believe that Lebanons political risk profile will improve markedly in 2012. That Prime Minister Najib Mikatis
government was only able to narrowly avoid collapse in late November 2011 simply highlights the uncertain policy climate and the
lengths which must often be reached in order to avoid crises.
TABLE: Lebanon – POLITICAL OVERVIEW.. 14
Long-Term Political Outlook .. 15
Political Upheaval Inevitable In The Long Term?...15
Political stability will remain hard to come by in Lebanon over the coming decade. However, despite the range of challenges facing the
government, we believe that major political upheaval will not occur without an external trigger, with a military conflict the most obvious
candidate.
Chapter 1.2: Economic Outlook – Lebanon.. 19
SWOT Analysis..... 19
Economic Activity.... 20
Economy Entering A Rough Patch..20
Downside risks to the Lebanese economy are becoming increasingly pronounced on the back of the ongoing crisis in Syria and political
paralysis in Beirut. We have pencilled in real GDP growth of 3.2% in 2012, with remittances likely to provide a key base of support for
household consumption.
TABLE: Lebanon – GDP BY EXPENDITURE ..... 20
Fiscal Policy..... 22
Budget Deficit To Widen In 2012..22
We are pencilling in a slight deterioration to Lebanons fiscal accounts in 2012, as weaker-than-expected revenue streams and a rampup
in current spending push the budget deficit to 9.1% of GDP, compared to an expected 7.2% in 2011.
TABLE: Lebanon – FISCAL POLICY.. 23
Monetary Policy.... 24
Inflation To Trend Lower..24
Consumer price inflation in Lebanon will trend lower in 2012 as the ongoing downtrend across the global commodities complex and
weaker economic activity domestically weighs on headline prints. We project average annual consumer price inflation of 4.4% y-o-y
in 2012, down from an expected 5.3% in 2011. The main upside risk to our forecast stems from the potential for a greater increase in
government spending than currently expected.
TABLE: Lebanon – MONETARY POLICY.. 24
Chapter 1.3: 10-Year Forecast – Lebanon.... 27
The Lebanese Economy To 2021.... 27
Long-Term Growth Depends On Structural Reforms....27
Lebanons economy will face a host of structural challenges in attempting to meet its long-term growth potential, with a massive
infrastructure deficit, elevated public debt load and ongoing political risk weighing on our outlook through 2021.
TABLE: Lebanon – LONG-TERM MACROECONOMIC FORECASTS .. 27
Chapter 1.4: Business Environment – Lebanon... 29
SWOT Analysis..... 29
Executive Summary – Syria... 31
Core Views ....31
Major Forecast Changes ..31
Key Risks To Outlook ..31
Chapter 2.1: Political Outlook – Syria... 33
SWOT Analysis..... 33
Domestic Politics..... 34
International Pressure Will Not Bring A Voluntary Resignation...34
Multilateral action to squeeze the Syrian regime of President Bashar al-Assad will be too weak to bring about significant change, and
bilateral efforts by the West will have a substantial economic impact but fail to change his policies towards protestors.
Foreign Policy... 35
Intervention Prospects Rising, But Major Obstacles Remain...35
The prospect of foreign intervention in Syria is rising, but there continue to be many obstacles. If external intervention were to take
place, it would most likely consist of a Turkish-controlled buffer zone in the north of the country, rather than a NATO air campaign.
Long-Term Political Outlook .. 37
Post-Assad Era Likely To Increase Instability..37
Syrian President Bashar al-Assad and his regime are fighting for survival, but regardless of whether it endures or is overthrown, the
countrys leadership will struggle to improve governance and deliver robust economic growth.
Chapter 2.2: Economic Outlook – Syria.... 41
Economic Activity.... 42
Dismal Growth Prospects Ahead.....42
Syrias degenerating political situation will have a knock-on effect on growth, and we have pencilled in real GDP growth rates of -2.2%
and 1.1% in 2012 and 2013 respectively.
TABLE: Sy ria – ECONOMIC ACTIVITY... 42
Exchange Rate Policy.. 43
SYP: Waiting For A Big Drop ..44
TABLE: Sy ria – Ex change rate..... 44
Chapter 2.3: 10-Year Forecast – Syria... 47
The Syrian Economy To 2021..... 47
Weak Human Capital To Constrain Growth ...47
Private consumption, foreign investment and infrastructure development will drive growth in Syria over the coming decade, though we
note that the effectiveness of these drivers depends in part on the success of structural reforms.
TABLE: Sy ria – LONG-TERM MACROECONOMIC FORECASTS . 47
Chapter 2.4: Business Environment – Syria. 51
SWOT Analysis..... 51
Chapter 3: BMI Global Assumptions .... 53
Eurozone Break-Up Risks Rising ...53
TABLE: GLOBAL ASSUMPTIONS ..... 53
TABLE: DE VELOPED STATES REAL GDP GROWTH FORECAST .... 54
TABLE: REAL GDP GROWTH CONSENSUS FORECASTS .... 54
TABLE: EMERGING MARKETS REAL GDP GROWTH FORECAST ... 55