The International Monetary Fund indicated that higher oil prices have an overall positive impact on economic activity in Lebanon, as strong positive second-round effects offset the negative first-round impact of an oil price shock. It said that higher oil prices would increase Lebanon’s exports and tourism receipts in the short term, and would drive deposit inflows and private sector credit growth in the medium to long term, as reported by Lebanon This Week, the economic publication of the Byblos Bank Group. The IMF added that Lebanon benefits more generally through an increase in external demand and capital inflows – as oil exporters recycle their oil proceeds – given the country’s close economic ties with major oil exporters in the region. The IMF estimated that a 10-percent rise in the real price of oil translates into Lebanon’s real GDP being 0.8 percent to 1.2 percent higher two to three years after this price rise. It attributed this outcome to the presence of large positive second-round effects operating through various transmission channels. It revealed that a 1-percent hike in the income of oil exporters would generate an increase of about $44 million in Lebanon’s exports and tourism revenues, which is equivalent to 1 percent of GDP. It noted that oil exporters are the recipients of about 33 percent of Lebanon’s exports of goods and account for one-third of its tourism receipts. It added that a 1-percent increase in the income of GCC oil producers would generate an additional $40 million in remittance inflows to Lebanon, equivalent to 1 percent of the country’s GDP. The Fund said that a 1-percent increase in oil prices results in an average increase of 0.26 percent in Lebanese exports during the following four quarters. Also, a 1-percent hike in oil prices leads to a 0.21-percent rise in passenger arrivals to Lebanon, with the positive effect waning by the 10th quarter following the rise in oil prices. The rise in oil prices, according to the IMF, will help further increase bank deposits in Lebanon. It added that private sector credit responds to an oil price shock similarly to that of bank deposits, as a 1-percent rise in oil prices leads to a 0.21-percent increase in private sector credit in the third year. In parallel, the IMF indicated that the immediate negative effects on Lebanon of an increase in oil prices consist of a higher import bill and a wider fiscal deficit. It noted that higher oil imports represent an income transfer from Lebanon to oil exporters, given that oil imports account for about 20 percent of Lebanon’s imports of goods and were equivalent to almost 10 percent of GDP in the 2009-10 period. It added that an increase in oil prices by $10 per barrel would lead to a $500 million increase in nominal imports, equivalent to 1.3 percent of 2010 GDP. Also, it said that the fiscal deficit widens by 0.5 percent of GDP for every $10 per barrel increase in oil prices.