BEIRUT: Deposits in Lebanese banks are expected to recover from a dip in the first five months of 2019 as customer optimism returns after approval of the state budget, the chairman of the Association of Banks in Lebanon said.
Salim Sfeir said deposits had fallen to $176 billion at the end of May from $179 billion at the end of December. “I expect a very positive recovery. Our market is very elastic,” he told Reuters in an interview.
He also said banks would take steps to support the economy in the next four to seven months, including working to reduce interest rates and to extend more loans to some sectors.
“The banks are liquid enough, the banks are optimistic that they will be able to give the leverage needed to the economy to take off again,” said Sfeir, who is also chief executive officer of Bank of Beirut.
One of the world’s most heavily indebted states, Lebanon finally approved the 2019 budget on Friday, aiming to cut the deficit as part of efforts to put the public finances on a sustainable path.
The government embarked on long-delayed reforms as the economy stagnated and as deposit growth in the banking sector slowed: the sector has long played a critical role in financing the state and the wider needs of the economy.
“There was plenty of worry in the air,” Sfeir said, linking these concerns to political friction over the budget. “The worry was manifested in depositors asking for more interest on their holdings, or some withdrawal of deposits,” he said.