Trade deficit fissure in Lebanon widens by 5%

Lebanese customers choose imported goods over the locally manufactured products adding to the woes of trade figures.

adonis EDL barthelemy leyconie
The high electricity cost contributes majorly into the trade deficit as it makes it hard for reducing the cost of production in Lebanon. © Barthelemy Leyconie

Bad news, again and again. Lebanon is facing a trade deficit whereby the fissure seems to have widened by 5% which amounts to 13 billion U.S. dollars. This deficit is observed for the first nine months of 2018 from the same period in 2017.

The Byblos Bank came up with the figures from the Higher Customs Council, while it attributed the deepening trade deficit to the increment seen in the import sectors by “4.9 percent to 15.2 billion dollars” for the above mentioned period. During this period a growth of “4.1 percent to 2.2 billion dollars” has been observed from the “aggregate exports”.

In August 2017, the Lebanese President Michel Aoun approves a salary hike for the employees working in public sector and Adnan Rammal, one Economic and Social Council representative of the trade sector thinks that the growth in incoming salaries led to purchase growth in the people of Lebanon. Furthermore, he added that the higher quality of the imported products in comparison to “local produce” has caused the consumers to lean towards the former.

In fact, Rammal also pointed out that the local factories have failed to “increase their production” to match the satisfaction of the demand for local products, as a result, the increased purchasing powers of the local have turned towards imports. In his words: “Local manufacturers do not have enough money to expand their businesses, not to forget the high cost of production in Lebanon”.

Many of the manufacturers in Lebanon are urging the government to slash down on the production cost for many amongst them complained of having to shut down citing “heavy losses”.

However, the high electricity cost contributes majorly into the trade deficit as it makes it hard for “reducing the cost of production in Lebanon”. The government in Lebanon pays an annual bill of “1.8 billion dollars” for the purchase of 90% of fuel, which “incurs heavy costs for consumers”.

Furthermore, among the reasons leading up to the trade deficit, the factories and consumers alike have to pay a “second bill for private generators” as the electricity production capacity of the government does not satisfy the “needed amount”. Moreover, Rammal informed that the labour cost involved in the production sector in Lebanon is costlier in comparison to “other countries that compete with Lebanon”.

In fact, Jassem Ajaka, an independent economist, also seconds the views of Rammal, as he said that the Lebanese agricultural sector remains weak due to the lack of modern technologies needed for satisfying the “full demand of the Lebanese market”.

Furthermore, the trade deficit also stems from the fact that the Lebanese government opened the doors of the country’s market space, whereby allowing “foreign products to enter the market and compete with local produce”, added Ajaka. In his words: “The government is well aware that Lebanese producers cannot compete with foreign ones”.

Experts are of the opinion that the government needs to “impose custom fees on imports” as a suitable step to bridge the trade deficit and to cut down on the competition resulted by the introduction of foreignproducts besides boosting the local product consumption. Rammal said: “The government should impose custom fees on products that can be produced in Lebanon”.

Additionally, Rammal stated that the government also needs to introduce imports so as to safeguard the local products, although the Economy Ministry needs to simultaneously keep a hold on the prices to check the price inflation from the manufacturers’ part as “monopolizing the market” will hurt not only the consumers but also the merchants.

On the other hand, Ajaka thinks that the government ought to spend more on developing the agricultural sector to enabling the same for meeting the local needs. He said: “The government should introduce new equipment and technologies for the modernization of this sector”.

While, Dana Halawi informed that: “Ajaka said that if Lebanon succeeds in improving its manufacturing industry so that is capable of producing the items that are imported by Lebanese merchants, it could save 8 billion dollars from the import bill annually”.