A June 2021 estimated that Lebanon’s depression was likely to rank among the world’s top three most severe economic crises since the 1850s, noting that the “brutal and rapid” contraction in Lebanon’s GDP was of a magnitude usually affiliated with conflicts or wars.
The World Bank estimated Lebanon’s real GDP fell 5.4 percent in 2022, after 7 percent and 21.4 percent contractions in 2021 and 2020, respectively. Lebanon’s currency, the Lebanese pound (LBP), has lost more than 98 percent of its value since 2019. Inflation reached an estimated 186 percent in 2022. According to the United Nations, the country’s income poverty rate increased from 25 percent in 2019 to 74 percent in 2021. Lebanon’s financial sector accumulated more than $72 billion in USD losses. As a result, Lebanese depositors face monthly withdrawal restrictions on their accounts, and some turned to armed robbery of their own banks to access their life savings. Public sector workers, demanding salary increases to keep pace with rising inflation, have stopped showing up to work or only work one or two days per week. Some essential public sector services – such as registering new home ownership – are either unavailable or significantly delayed. A growing number of Lebanese have felt compelled to emigrate in search of a better life.
The IMF and the government reached a staff-level agreement on proposed economic reforms in April 2022. The government committed to executing eight reform-related prior actions that the IMF requires before its Executive Board will consider financing the $3 billion, four-year loan. However, as of April 2023, the government has made only limited progress on these prior actions. An IMF delegation visited Lebanon in March 2023 and concluded that the country is at a “dangerous crossroads” and, absent critical reforms, faces “a never-ending crisis.”
The primary obstacle to undertaking these and other much-needed reforms remains persistent political paralysis. Since the end of President Michel Aoun’s term in October 2022, Lebanon’s presidency has remained vacant. Meanwhile, the country’s Cabinet is in caretaker status with reduced authorities per the country’s constitution, creating a “double vacancy” for the first time in Lebanon’s history. Even before this double vacancy, Lebanon’s politicians did not pursue reforms at a speed commensurate to the severity of the country’s economic crisis. The United States has called on Lebanon’s political leaders to set aside their partisan brinkmanship and work for the common good of the Lebanese people.
While the overall economic picture is bleak, there are still some sources of optimism. Lebanon and Israel finalized a historic agreement to demarcate their maritime boundary on October 27, 2022, with the United States playing a lead negotiator role. The deal clears the way for Lebanon to develop underwater hydrocarbon resources, although industry experts expect it will be years before Lebanon could begin large-scale extraction, and the amount of any commercially extractable resources is still unproven. Additionally, Lebanon still has the underpinnings of a free-market economy with unrealized potential. The country benefits from a highly educated labor force, diverse culture, rich history, strong tourism appeal, and mild climate. The Lebanese diaspora community has provided a backstop to Lebanon’s economic woes through a steady flow of remittances and could be the country’s vanguard of renewed investment if conditions improve.
|TI Corruption Perceptions Index||2022||150 of 180||http://www.transparency.org/research/cpi/overview|
|Global Innovation Index||2022||N/A||https://www.globalinnovationindex.org/analysis-indicator|
|US direct investment position in Lebanon (outward) US$M||2021||$346||https://apps.bea.gov/international/factsheet/|
|World Bank GNI per capita, Atlas method||2021||$5,110||http://data.worldbank.org/indicator/NY.GNP.PCAP.CD|