The Lebanese economy is a “credit economy” where the function of financial intermediation takes center stage. Up to July 2015, the totality of loans granted in the financial sector constituted 110% of GDP. The value of these loans amounted to $55.66B in the first seven months of the year and the 3.23% year-to-date growth of these credits even exceeded 2015’s expected GDP growth of 2%.
The biggest sectors benefitting from loans are the same ones that are contributing the most to Lebanon’s GDP. Loans for housing and real estate services make up 25% of total loans granted in the financial sector and at the same time the real estate sector is the single largest generator of value added in the country with a share of 14% of GDP in 2013. Wholesale and retail trade loans account for 21% of total loans and are also the second largest contributors to GDP with a share of 13%. Contracting and Construction loans constitute 18% of total loans and at the same time add 6% to Lebanon’s GDP. Loans for the transport sector represent 3% of total loans and similarly represent 4% of GDP. Loans to Hotels and restaurants represent 2% of total loans and represent a share of 3% in GDP…
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Financial Intermediation in Lebanon Spinning the Economic Wheel