Uncertainty lingers in Lebanon as shops in Beirut shut down

Lebanon's economy has been battered. Import and export costs have been driven up by the Syria crisis, and refugees are flooding in.

The once bustling streets of Beirut's Place L'Etoile is starkly quiet on a sunny Saturday afternoon. Now a few families sit in the ever-decreasing number of cafes as doors to the local shops remain shut.

Since the beginning of the Syrian crisis, Lebanon's economy has taken a battering and with the country's own internal political problems, the situation has worsened.

Moutra Toubia Aoun street in Place L'Etoile, once home to boutique shops is virtually a ghost town, with all but the Subway fast-food restaurant closed down over the past year.

The area, just a stone's throw away from Riad El Solh, the seat of parliament, has been regularly occupied by protesters who close off access to the streets in the area.

This has had a dramatic impact on the independent retailers in the Solidere area, an upmarket development where apartments cost upwards of US$1 million (Dh3.6m) and now many stores have been forced to shut down.

The crisis in Syria has increased import and export costs of Lebanese companies.

The alternative arts store Plan Bey, based in the trendy area of Mar Mikhael near Solidere, has been struggling to source some of its stock which comes from Syria. Its TaTa Marie range of foodstuffs, made by a chef of the same name in Latakiya, Syria, in particular is becoming increasingly difficult to get to the store.

"She now has difficulties sourcing her ingredients, one week she has no fuel, the next she has no fruits for her jam," says Karma Tohme, the co-founder of Plan Bey. "But somehow she manages. It has become harder to get the supplies."

The exact number of Syrian refugees that have flooded into Lebanon is unknown, but estimates range from 800,000 to 1 million. Observers have voiced their concerns over the influx of Syrians on Lebanon's fragile political environment, which recently resulted in the resignation of Najib Mikati's government.

While the wealthy elite among the Syrian refugees are contributing to the economy by buying flats and cars among other goods, the majority are not so well off and have now become a burden on the Lebanese economy.

There are growing fears that the poorest among the refugees will turn to crime to survive.

In the trendy Gemmayzeh area, young Syrian children dance to the music blaring out of cars in the hope of making some spare change.

There is an air of uncertainty throughout, stemming not only from the actions of the Syrian government, but also from the local divisions.

Yet in some areas, life continues as normal. Near the high-end Zaitunay Bay, where an apartment can cost upward of $8,000 per square metre, you could be fooled for thinking all is well. Women with expensive handbags and designer clothes stroll down the promenade by the marina.

Lebanon depends quite heavily on remittances, which stood at $7.5bn last year according to the World Bank, and it is these wealthy expatriates from places such as Dubai and the United States that have pushed up prices locally. Zaitunay Bay opened in December 2011. There and in other upscale places near the water, yachts with American flags are moored in the bays and have become the go-to areas of expats and their families.

Inflation stood at 3.07 per cent in January last year, rising to an all-time high of 11.1 per cent in November, before dropping to 10.1 in January this year.

"You see women walk down the streets with bags that cost thousands of dollars and you wonder how they can afford them, because with the salaries in Lebanon, no one would be able to afford these things," said one resident.

Barclays Capital cautioned the severe deterioration in Lebanon's public finance performance and warned about future prospects. The country's fiscal deficient widened to 9.4 per cent of GDP last year, from 6 per cent in 2011.

Lebanon's decrepit infrastructure has hastened the public finance constraints. A 20 per cent increase in transfers to Electricite du Liban, the state-owned power operator has further damaged budgets and yet electricity production is still low.

While the capital has up to 21 hours of electricity a day, areas outside of Beirut muster three hours. The use of private diesel generators can be costly and cause a lot of air and noise pollution for those who can afford it.

Many are adopting a wait and see approach, but with years of conflict and wars in Lebanon, for many, this is just the way of life.