Bilateral Economic Relations
Economic relations between Italy and Lebanon have been affected by the economic and financial crisis hitting hard Lebanon since 2019. Despite the delays in the implementation of a reform plan that will allow the country to embark on the path of growth again, the commercial partnership has shown significant resilience thanks to the vitality of the Lebanese private sector.
Economic relations are in fact traditionally focused on Italian exports to the Lebanese market, characterized by a good level of openness in sectors with high added value. This is also thanks to the role of the Lebanese diaspora, spread throughout the world, capable of promoting triangulation mechanisms through joint investments in third countries. However, the volume of investments in Lebanon is minor. They are also affected – in addition to the absence of sovereign guarantees following the declaration of default – by more structural problems linked to the nature of the Lebanese market (pronounced political risk, inadequate infrastructure, oligopolistic networks susceptible to create barriers to foreign investments).
Italy is firmly among Lebanon’s top suppliers. The range of Italian products exported to the Lebanese market, through distribution and franchising agreements, is widely diversified and mainly includes refined petroleum products, machinery, chemical products, jewelry and gold smithery, furniture and design, textiles and clothing, metals, plastic products, in addition to agri-food products.
In the two-year period 2020-2021, Italian exports to Lebanon decreased in volume following the economic crisis the country is confronted with, like all those of other supplier countries, but Italy still managed to preserve its relative market share compared to competitors. However, 2022 marked an important reversal in the trend, which appears to have been maintained in 2023. Italy is currently Lebanon’s fifth supplier, the first European country after Greece.
The crisis of the Lebanese economic system highlights the need for a transition from a model based predominantly on imports and services (equal to 83% of GDP, mainly relying on banking, real estate and tourism sectors) towards a more sustainable model grounded on the productive sectors. In this perspective, in addition to consumer goods, which have historically represented a significant component of Italian exports, it would also be possible to increasingly include capital and intermediate goods, to support opportunities for creating productive partnerships between Italian and Lebanese companies, i.e. in agri-food and low environmental impact technology sectors. In this context, Italian economic diplomacy is supported by development cooperation projects, which in recent years have been investing increasingly in these sectors and, more generally, in support for the private sector. Various entrepreneurial opportunities are thus linked to initiatives financed by Italy, the European Union and the World Bank.
Since 2017, Lebanon has begun the process of exploiting offshore energy resources, starting energy exploration in some blocks of its territorial waters in 2020, with the participation of Italian companies. Geographically, the area is part of the so-called “Levant Basin”, which includes the neighboring countries where numerous initiatives for the extraction and marketing of oil and natural gas resources are taking place. Lebanon is not a member of the Eastern Mediterranean Gas Forum.
The Italian Trade Agency (ITA) office is active within the Italian Embassy. More information on opportunities and risks, as well as on the organization of trade fairs and sectoral missions, can be found on the following link: https://www.ice.it/it/mercati/libano
Lebanon: Multilateral Agreements and international markets
Lebanon has free trade agreements with Arab countries, being part of the “Greater Arab Free Trade Area” (GAFTA), and with the European Free Trade Association (EFTA). It also concluded a Euro-Mediterranean Association Agreement with the European Union in 2006.
In 1999, Lebanon applied for membership in the World Trade Organization (WTO), where it has an observer status. The process of adapting to WTO rules still requires several steps, especially as to legislations on the protection of intellectual property and compliance with the TRIPs Agreement (Agreement on Trade Related Aspects of Intellectual property rights).
The Arab countries represent the main outlet market for Lebanese exports, of which they absorb around 41% of the total (in particular agricultural products), followed by the EU with a share of around 10%. Conversely, the EU ensures almost 40% of Lebanese imports (prevalently consumer goods); other major suppliers include Turkey, China and the United States. Furthermore, one of the Lebanese structural problems derives from this pronounced asymmetry between outlet markets and the origin and type of goods, namely a strong imbalance in the trade balance.