PRLog (Press Release) -
Apr. 28, 2011 - Regional Tensions Set To Boil Over? The Q111 Jordan, Lebanon, Syria Business Forecast Report describes an increasingly fragile macroeconomic and political risk backdrop heading into 2011. In terms of broader regional stability, we are growing particularly concerned about the potential indictment of key members of Hizbullah following the release of the UN 's Special Tribunal for Lebanon (STL )'s findings, which is investigating the 2005 assassination of former Lebanese prime minister Rafik Hariri. Should regional political tensions mount more quickly than currently anticipated, this would pose a clear downside risk to economic growth and reform momentum over the coming year. Nevertheless, broadly speaking we maintain a relatively favourable medium-term macroeconomic outlook on the region, as increased investor interest (particularly from the Gulf) underpins foreign investment inflows going forward. Despite an ongoing political stalemate that has seen the legislative process come to a halt and much needed economic reforms put on the backburner, Lebanon's convergence story remains ongoing. That said, we expect growth momentum to slow through our five-year forecast period, with real GDP projected to expand by an average of 5.0% year-on-year (y-o-y) between 2011 and 2015, down from an estimated average of 8.3% in 2007-2010. While the economy has so far proved resilient in the face of political paralysis, growing internal political ructions pose significant downside risks to our forecasts. The Syrian government's strong emphasis on infrastructure development has been clearly evident of late, with the country's 11th Five-Year Plan prioritising the sector to meet the requirements of economic growth and social development. Although the plan, which covers 2011-2015, has yet to be finalised and approved, the 2011 government budget has been approved by the cabinet and earmarks 45% of total spending for investment expenditures. We believe Syria's emphasis on infrastructure development will help to keep real GDP growth stable in the 4-5% range over the medium term. However, we note that Syria's unfavourable business environment may impede the government's ability to achieve its infrastructure goals. Despite Jordan being a relatively small economy and not benefitting from the luxury of rich oil resources, we believe that a strong growth story combined with a relatively stable political environment will continue to make it an attractive destination for foreign investment over the medium term. We highlight the pharmaceutical sector as one of the most attractive industries in the country, while we remain cautious about the freight transport, infrastructure and telecoms sectors.
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