BEIRUT - Outgoing Finance Minister Jihad Azour predicted on Tuesday that Lebanon's GDP growth will see an upturn in 2008 as a result of a better political climate. "The GDP growth in Lebanon in 2008 is expected to be better than 2007 due to the positive political climate. But if a negative development occurred then we will have a lower growth," Azour told reporters at the Finance Ministry in his last press conference.

Azour estimated that GDP growth in 2007 reached 4 percent, although most economists agree that the growth rate was actually lower than this figure.

Azour, who will leave his post after a new unity cabinet is formed, said that the next government should continue to implement the reforms that were pledged during the Paris III donors conference.

However, he acknowledged that the new cabinet may have to make some modifications to the pledged reforms in light of high oil prices and inflation.

"When the Paris III reform paper was made, the prices of oil were relatively stable and inflation was not too high," he said.

The Paris III paper calls for the swift implementation of key reforms such as the privatization of the telecom sector. But the government of Prime Minister Fouad Siniora was unable to carry out many of the reforms as a result of a protracted political crisis and unstable security environment.

Observers doubt that the next government will make much progress on the pledged reforms, since its primary duty will be to oversee the upcoming parliamentary elections in 2009, after which a new government will be formed.

Azour also discussed the implementation of an increase in public salaries that was recently approved by the current Cabinet. He said the measure had not yet been implemented because it had not been signed by resigned Labor Minister Tarade Hamadeh for unknown reasons.

"I hope that the next cabinet will endorse the salary increment," he said, adding that he hoped the private sector would also abide by the decision.

The minimum wage was increased from LL300,000 to LL500,000 and increases were applied to salaries of up to LL2,000,000 a month.

Azour said the new government must also review the salary scale for the public sector.

He added that the government had succeeded to some extent in controlling the budget deficit over the last three years, despite the volatile political conditions in the country.

Azour reiterated that the losses of Electricte du Liban had increased considerably as a result of soaring oil prices.

"If we take the losses of EDL aside, we will find out that the ministry was able to control spending in general," he said.

EDL losses reached $662 million in the first five months of 2008 and officials fear that the deficit may exceed $1.4 billion at the end of the year if the prices of oil continue to climb.

The Finance Ministry said that EDL losses up to May of this year rose by $304.2 million to more than $662 million.

This huge loss boosted the budget deficit in the first five months of 2008 to 33.56 percent of total spending, compared to a deficit of 24.58 percent in the same period of last year. - Daily Star