Lebanon - Economic sectors

Lebanon's economic sectors reflect the small size of the economy, which places limits on the availability of natural resources, population, and domestic markets. Before the civil war, the services sector was by far the largest contributor to the economy and employed the largest proportion of the labor force . The industrial sector was the second largest contributor to the economy, while agriculture accounted for a smaller proportion of national income.

As of 2001, Lebanon's economy continues to rely heavily on the services sector. Services—mainly banking, tourism and trade—account for 68 percent of the GDP. Lebanon's agricultural and manufacturing base continue to be small and has yet to regain its pre-war competitiveness. Economic slowdowns in Lebanon began in 1996, with a drop in construction activity, and the economy was in recession during the 2000-01 period. The greatest obstacles to growth in all of Lebanon's economic sectors are their vulnerability to regional instability and international trade opportunity.

Recognizing these obstacles, Lebanon has moved to form a series of trade alliances, including a customs union concluded with Syria in 2000, an Arab free trade agreement, and a Euro-Mediterranean Association Agreement with the European Union. Lebanon is also planning to join the World Trade Organization. Lebanon's domestic political environment has improved since the Israeli withdrawal from south Lebanon in May 2000. Although some elements of instability still remain (mainly the occasional exchanges of gunfire between guerrillas belonging to the Shi'ite Hizballah group and Israeli soldiers), the Israeli withdrawal is expected to enhance international confidence in Lebanon's investment potential. The tourism

sector stands to benefit most. Since 1997, the government has attempted to tackle seriously the budget deficit, raising custom duties by 2 percent in 1998 and introducing an entertainment tax on restaurant, bar, and hotel bills. However, spending continues to be high, and the budget deficit in 2000 was equivalent to 53.5 percent of expenditures.