Lebanon's economy to have biggest plunge since civil war's end: IMF

A worker walks outside the Lebanese Central Bank that has been shut down as part of the preventive measures against the coronavirus, in Beirut, Lebanon. (File photo: AP)

The IMF has projected that Lebanon’s gross domestic product will contract 12 percent in 2020, the largest contraction since the end of the country’s 15-year civil war.

Lebanon is currently in the midst of ongoing financial and currency crises, and the coronavirus pandemic and subsequent lockdown has further damaged the country’s wilting economy. The country saw a 6.5 percent contraction in 2019, according to the International Monetary Fund’s World Economic Outlook titled “The Great Lockdown” published in April.

In 1990, the year Lebanon’s civil war came to a close, the GDP growth backslid 13.4 percent, according to IMF data.

Regionally, Lebanon’s is the second largest negative projection for 2020, behind only Libya, which the IMF predicts will lose nearly 60 percent of GDP growth this year.

Lebanon only fares slightly better than two of its regional counterparts –Sudan at -7.2 percent and Israel at -6.3 percent.

Read more: Lebanon: Leaked plan sets way forward, but country's path could spell lost decade

For the Middle East and Central Asia region as a whole, the International Monetary Fund projects a 2.8 percent contraction for 2020. For non-oil states in the region, which includes Lebanon, the expectation is GDP will contract by 4 percent on average.

Only three countries – Turkmenistan, Uzbekistan, and Tajikistan – from the Middle East and Central Asia post low, but positive GDP projections for the year.

“The health crisis is therefore having a severe impact on economic activity. As a result of the pandemic, the global economy is projected to contract sharply by –3 percent in 2020, much worse than during the 2008–09 financial crisis,” the report read.

Globally, Lebanon’s projected 12 percent decrease in GDP puts it between Greece's -10 percent and Venezuela’s -15 percent. Lebanon has been compared to Greece and Venezuela, both of which have suffered from recent economic or currency crises.

Lebanon’s public debt currently stands at 170 percent of its GDP and is one of the highest in the world. In mid-2019, it stood around 150 percent. In 2009, immediately prior to Greece’s economic downturn, the country’s debt-to-GDP ratio was 126 percent. Now, it stands at 180 percent. Rising inflation in Lebanon has also drawn comparison to Venezuela, which has suffered from hyperinflation for years.

However, other variables in both cases make for imperfect comparisons. For example, Venezuela’s oil wealth and rent-driven economy allowed it to pay for social programs and subsidies for years until the global price of oil dropped and food shortages and a scarcity of basic goods emerged in early 2014. Lebanon has no oil, and although it recently began offshore drilling for oil and gas, no black gold has been found yet.

Coronavirus lockdowns are likely to be lifted in the coming months, and the IMF projects positive growth for 2021 for countries around the world, but does not provide a predicted growth rate for Lebanon. With the exception of Sudan, all other regional countries have predicted positive growth, even Libya.

Read more: Coronavirus lockdown more harm than help for Lebanese who can't afford to stay home

The report continues “In a baseline scenario, which assumes that the pandemic fades in the second half of 2020 and containment efforts can be gradually unwound, the global economy is projected to grow by 5.8 percent in 2021 as economic activity normalizes, helped by policy support.”

The full report is to follow next month.

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Last Update: Wednesday, 20 May 2020 KSA 09:57 - GMT 06:57
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