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Oman, Lebanon to boost spending, Tunisia GDP may shrink

A wave of social handouts are underway to stem protests in parts of the Arab world mostly spared the year's unrest

Reuters, Wednesday 7 Sep 2011
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Oman and Lebanon plan to boost their government budget spending in 2012, while Tunisia's economy could shrink slightly this year as it is reeling from impacts of social unrest, finance ministers said this week.

Revolts against autocratic leaders and economic hardships that swept through much of the Arab world this year undermined economic activity and triggered a wave of social handouts.

In Oman, the budget spending should rise to 9.2 billion rials (US$23.9 billion) this year, slightly higher than had been expected in June and well above the original 8.1 billion-rial plan, the Gulf state's finance minister said.

"Now, it is 9.2 billion rials," Darwish al-Balushi told Reuters about government spending in 2011, speaking ahead of a Wednesday meeting of Arab finance ministers in the capital of the United Arab Emirates.

"We are looking at the oil price and we hope it will stay at a decent level. We have seen a decline in the oil price but as long as it stays above $80 (per barrel) we will be alright," he said.

Protests demanding jobs and end of graft prompted Sultan Qaboos bin Said, a U.S. ally who has ruled Oman for 40 years, to promise a $2.6 billion spending package in April. He also announced plans to create 50,000 new jobs among other measures.

Balushi did not say on Tuesday how exactly the 2012 budget of the sultanate, which pegs its currency to the dollar, would look like but hinted there may be another spending rise.

"We will have requirements here and there, but maybe another 10 percent on the spending side," he said.

A ministry official told Reuters in August that Oman planned to increase government spending by 9 per cent in 2012 from this year to finance construction projects and create more jobs for nationals.

Brent crude prices have been hovering between $92 and $127 per barrel since the beginning of the year LCOc1.

In Lebanon, hit by months of political bickering this year, the 2012 government budget will increase by roughly 15 per cent, its finance minister said on Tuesday.

"The budget will increase by 15 per cent roughly. Our deficit will be not more than $3 billion at best. So we'll be borrowing," Mohammed Safadi told Reuters.

He did not give further details but said he hoped to present the 2012 budget to the cabinet by the end of September.

Lebanon's 2011 draft budget, presented to the cabinet last September, put spending at 19.77 trillion Lebanese pounds ($13.1 billion), projecting a deficit of $3.6 billion.

"Our expectations, it (inflation) will not be less than 3 per cent next year. But we are expecting growth of not less than 4 percent real GDP growth in 2012," Safadi said on the sidelines of a reception in Abu Dhabi's luxurious Emirates Palace hotel.

The International Monetary Fund said in April Lebanon's 2011 economic growth rate would fall to 2.5 per cent from an average annual 8.0 per cent over the last four years, due largely to political uncertainty.

Oman, benefiting from robust oil prices and strong government spending, should see its gross domestic product growing by around 5 per cent this year, Balushi said, reiterating his June comments, above analysts' forecast of 4.1 per cent .

In Tunisia, the economy could contract slightly this year, although the government still hopes for an up to 1 per cent growth, Finance Minister Jalloul Ayed said at the same event.

"Growth is not going to be very good. We were hoping for the GDP growth rate to be between 0 and 1 per cent and it looks like now there is a possibility that it could be negative," Ayed told Reuters.

"But it all depends on how the economy will perform in the second half of the year. To be optimistic it will be around zero, to be a little bit more realistic it will be a little bit negative," he said.

An uprising in January forced veteran leader Zine al-Abidine Ben Ali to leave the country, whose GDP grew by an IMF estimated 3.7 per cent in 2010.

However, the violence and strikes that followed forced some businesses to suspend operations and also scared off foreign tourists, on whom Tunisia relies for a large part of its revenues.

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