Lebanon is expected to see $3 billion in capital flight – equivalent to 5 percent of its gross domestic product (GDP) – during the first nine months of 2019 as the country grapples with an economic crisis and ongoing political unrest, the International Institute of Finance (IIF) said in a report on Monday.
“Capital inflows to Lebanon, which largely take the form of foreign direct investment (FDI) and non-resident deposits, have slowed sharply in the past 18 months, leading to a significant decline in official reserves and the emergency of a black market,” Garbis Iradian, Chief Economist at IIF MENA said in the report, along with other IIF economists.
Lebanon could potentially access $11 billion in funds promised during the 2018 CEDRE investment conference in Paris, which could spur a substantial increase in non-resident capital flows, the IIF added.
However, the country is still stuck in a political deadlock, with widespread protests ongoing since October 17 as authorities are unable to agree on fiscal and structural reforms.
Hundreds of thousands of protesters in the capital city of Beirut and across the country have called for the Lebanese government to step down in recent weeks and accused officials and political parties of corruption.
On October 29, Lebanese Prime Minister Saad Hariri resigned from the government, weeks after the unprecedented wave of protests began in the country.
“Prospects for recovery of non-resident capital inflows hinge on achieving political stability (formation of a new government) and implementation of deep reforms, which would support confidence both at home and abroad,” Iradian said in the IIF report.
In the same report, the IIF said that capital flows from non-residents to MENA are expected to increase from $165 billion last year to $200 billion in 2019, before thinning to $173 billion in 2020.