∣ GDP is lowest in decades and still diving
∣ Consumer spending limited to bare necessities
∣ Intermittent measures doing more harm than good
As promised, the country has made it to hell. Its financial and economic crisis is ranked among the top three most severe crises worldwide since the mid-nineteenth century. Lebanon has lost its status as an upper middle income economy. GDP per capita in US dollars is likely to plunge by 90 percent to just $1,200 by the end of this year compared with 2019. Most of household budgets will be allocated to basic consumer products and services over the next five years. Shareholders of banks are expected to lose all or most of their equity if a decision is taken to restructure public debt and the banks’ placements with the Central Bank (BDL). The deep recession is expected to linger in the absence of policymaking and reforms. A capital control law must be part of a bigger package of fiscal, monetary, and exchange rate measures. There is an urgent need for unifying the exchange rate in order to restore stability, attract investment, and fight smuggling. Reallocating a portion of the resources spent on subsidies towards social protection would provide solid foundations for reaching a social protection floor.
One of top three crises in 170 years
GDP is projected to contract by a further 9.5 percent in 2021 under extraordinarily high uncertainty after shrinking by an estimated 20 percent last year, the World Bank said in its ‘Lebanon Economic Monitor (LEM)’ for the spring of 2021. “The Lebanon financial and economic crisis is likely to rank in the top ten, possibly top three, most severe crises episodes globally since the mid-nineteenth century,” read the ‘Lebanon Sinking (To the Top 3)’ LEM. It said that the recession is likely to remain arduous and to linger “given the lack of policymaking leadership and reforms.” , Mashreq Regional Director at the World Bank, said: “Lebanon faces a dangerous depletion of resources, including human capital, and high skilled labor
