The World Economic Forum (WEF) ranked Lebanon in 80th place among 140 countries globally and in ninth place among 14 Arab countries on its Global Competitiveness Index for 2018. Lebanon also ranked in 23rd place among 34 upper middle-income countries (UMICs) included in the survey. Lebanon's global rank regressed by five spots from the previous survey, which constituted, along with Botswana, Guatemala, Haiti, South Africa and Tajikistan, the seventh steepest decline globally. Lebanon's rank among Arab countries declined by one spot year-on-year.

The index measures the ability of a country and its enterprises to compete in global markets by assessing the country's institutions, infrastructure, macroeconomic stability, education and healthcare systems, and entrepreneurial culture. It scores countries on a scale from zero to 100, with 100 representing the highest level of competitiveness.

Lebanon received a score of 57.7 points, lower than the global average of 60 points, the UMICs' average of 59.6 points and the Arab average of 58.4 points. Further, Lebanon's score came lower than Gulf Cooperation Council (GCC) countries' average of 67 points, but higher than the average of non-GCC Arab countries of 52 points. 

The WEF indicated that Lebanon has competitive advantages in the digital skills of the labor force, the ease of finding skilled employees, and in domestic credit to the private sector. In contrast, it noted that Lebanon ranks poorly in terms of reliable water supply, active labor policies, the insolvency regulatory framework for businesses, the quality of roads, and the future orientation of the government, among others. However, the WEF's updated measure for electricity infrastructure, which it assessed through the electrification rate and transmission and distribution losses, distorted the evaluation of Lebanon's global competitiveness. In fact, the WEF ranked Lebanon in first place globally on the electrification rate, but it did not take into consideration other factors that render the state of the electricity sector a burden on the competitiveness of the Lebanese economy.

Global investment bank Goldman Sachs considered that the formation of a new government in Lebanon would have a positive impact on sentiment over the short term. It indicated that there is an emerging broad consensus among the country's political class on economic reforms, which would bode well for economic policy. It said that policymakers appear to have a clear focus on a set of economic priorities that they intend to address in the immediate term, specifically fiscal consolidation, electricity reforms and implementing projects under the CEDRE conference. 

The bank pointed out that the drive for fiscal consolidation is motivated by concerns about the sustainability of Lebanon's public finances, as well as by the need to narrow the fiscal deficit as a condition to unlock the funds that the international community pledged at the CEDRE conference. It said that policymakers consider that reducing Treasury transfers to Electricité du Liban (EdL) would yield rapid fiscal savings, which they project at about $2bn per year, equivalent to 3.5% of GDP, starting with fiscal savings of up to $1bn in 2019. However, the bank considered these short-term targets to be ambitious. It added that implementing policies that lead to higher GDP growth would help reduce the fiscal deficit-to-GDP ratio. It noted that policymakers believe that there are limited prospects for other initiatives, such as freezing recruitment in the civil service, a possible recalibration of the tax system, or increasing taxes and fees.  

Further, it considered that the CEDRE-related projects are unlikely to have a significant impact on economic growth in the near term, given the time needed to prepare for the projects and the relatively limited government capacity to implement them. 

In parallel, Goldman Sachs indicated that the $5.5bn debt swap that the Ministry of Finance conducted with Banque du Liban (BdL) in May 2018 can finance maturing Eurobonds up until April 2019, which would limit short-term refinancing risks. It added that BdL and the Finance Ministry do not intend to carry out additional debt swaps, as this would undermine confidence in debt markets and distort pricing. It noted that Lebanon would tap the market to meet its financing requirements next year and could issue debt in smaller sizes and more frequently in order to achieve better pricing.

The bank noted that BdL would continue to encourage deposit inflows through its financial engineering operations until the prospects for such inflows improve through the formation of a new government, as well as the implementation of policies that would support economic activity and narrow the fiscal deficit. It estimated the aggregate returns for banks on their financial operations with BdL at about 17.5%, which consist of a 7% return on their deposits in US dollars at BdL and a positive carry of 10.5% on their operations in Lebanese pounds. It said that this has enabled banks to offer customers interest rates of up to 15% on five-year Lebanese pound deposits that get converted from US dollar deposits. It noted that BdL's operations focus on lowering the dollarization rate of deposits by encouraging the conversion of dollar deposits to Lebanese pounds. 

Goldman Sachs indicated that BdL's average cost of US dollar funds from local banks is 5.3%, while the negative carry with respect to BdL's conventional reserve placements is 3%. It indicated that BdL is offsetting these costs through high yielding holdings within its foreign currency portfolio, which include Lebanese Eurobonds, as well as through returns on other assets, including gold, real estate, and dividend-paying company holdings. It noted that other sources of BdL's income include revenues from its local currency portfolio and seigniorage income. The bank expected sentiment to improve following the formation of a government and the start of the reforms drive, which would ease funding pressure in the near term. But it noted that it is too early to know if the anticipated increase in deposits inflows would be enough to allow BdL to scale back its financial engineering operations.

Figures issued by the Ministry of Finance show that revenues from the value-added tax (VAT) totaled $2.3bn in 2017, constituting an increase of 7.5% from $2.15bn in 2016, and accounting for 85% of aggregate revenues from domestic taxes on goods and services last year. VAT collected at customs totaled $1.4bn in 2017 and increased by 9.3% from $1.2bn in 2016. It accounted for 59% of overall VAT receipts in 2017, up from a share of 58% in 2016. Also, the effective VAT rate at customs, which is the ratio of VAT collected at customs over total imports, increased marginally from 6.5% in 2016 to 6.9% in 2017, as VAT collected grew at a faster rate than imports. Further, collected VAT receipts from internal economic activity stood at $947.3m in 2017, constituting an increase of 5% from $902.8m in 2016, and compared to a growth of 8.4% in 2013, 13% in 2010 and 23% in 2009. VAT receipts from internal economic activity represented 41% of aggregate VAT revenues in 2017, down from 42% in 2016.  

In parallel, the ministry provided a breakdown of the amount of declared VAT from internal economic activity in 2017, the first such breakdown since 2013. The amount of declared VAT by the wholesale trade sector, excluding motor vehicles and motorcycles, stood at $153.2m in 2017, up by 3.85% from the previous year. Also, the amount of declared VAT by the retail trade sector, excluding motor vehicles and motorcycles, reached $120.7m last year, reflecting an increase of 7.2% from 2016. Further, the amount of declared VAT by hotels & restaurants totaled $76.3m, up by 9.1% year-on-year; while the amount of VAT declared by the construction and real estate sectors stood at $61.7m each last year. The amount of VAT declared by the real estate sector increased by 12.7% in 2017, while the amount declared by the construction sector regressed by 4.6% last year.