Last month Moody’s noted in regards to Lebanon that “deep structural challenges” (namely high public debt which hampers the scope for productive, public spending; see graph) continue to limit the economy’s longer term potential, though it riterated that a “robust level of external liquidity, a resilient bank deposit base, the government’s strong track record of debt servicing, and the country’s proven ability to mobilize donor support” underpinned its B1 rating for foreign and local currency government debt (raised from B2 last April).  To that first point, The Economist  recently underscored the strength of Lebanese remittances, which comprised a fifth of GDP in 2009 and remained buoyant during the global recession and after “not only because the war prompted generosity but also because of solid banks that offer 7% interest on the dollar and property prices that have doubled or tripled in four years.”  And last week the World Bank revised its estimate of remittances into Lebanon for 2009 upward, setting their value at $7.6 billion, and estimated they would reach $8.2 billion in 2010, the equivalent of 22 percent of total remittances to the Middle East and North Africa (MENA) region.  This means that while Lebanon has less than 1% of the MENA population, it receives 22% of all remittances destined for that region.  In regards to investing, banks (our favorite remains Blom Bank) remain a prudent way to capture Lebanese growth.  Historically quite liquid (due somewhat to pragmatism in the face of ever-turbulent geopolitics), Lebanese banks have been very profitable over the last two years, emerging relatively unscathed from the financial crisis due to conservative fiscal policies by the central bank, which prohibited exposure to risky instruments.

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