Beirut explosion: Lebanon's economy may shrink by 24 percent by end of year

Lebanon’s economy may shrink by a quarter this year after last week’s blast added to a collapse in output spurred by the pandemic, soaring inflation and a weakening currency, the Institute of International Finance said.

The nation’s $52 billion gross domestic product may plunge by 24 percent, more than the previous 15 percent projection, the Washington-based trade group for financial institutions said in a report. Damage from the explosion in Beirut, which left more than 150 people dead and 6,000 injured, is likely to exceed $7 billion, or 14 percent of 2019 GDP, wrote Garbis Iradian, the IIF’s chief economist for Middle East and North Africa.

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The blast “is calling additional attention to a pervasive culture of negligence, corruption, and complacency of the ruling class, which sunk the country into its worst economic and financial crisis, Iradian wrote.

The International Monetary Fund, World Bank and others have been holding back financial support mainly due to the continual failure of leaders in parliament and the government to make important changes, Iradian said. Those include judicial independence, appointing an electricity regulator and issues with public procurement law.

Lebanon’s government resigned on Monday as an outraged public demanded accountability for the catastrophe. Lebanon is seeking $10 billion from the IMF.

“The impasse in discussions between the Lebanese authorities and the IMF could be overcome by a new competent Lebanese economic team and majority support in the parliament to implement critical reforms, Iradian said.

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