Two years into a financial crisis and facing protests from its population, Lebanon could see some signs of economic recovery this year, Emirates NBD said in a note on Friday. 

The Dubai-based lender expects that Lebanon’s economy will return to growth in 2022, adding that it would, however, be in large part attributable simply to base effects following four years of contraction rather than due to any marked improvement in the outlook.

"We forecast real GDP growth of 2.9 percent, following an estimated -4.7 percent last year. If realised, this would mark the fastest pace of growth since 2013," said Daniel Richards, MENA Economist.

There are substantial risks to this outlook in both directions, as an uncertain political outlook continues to weigh on the recovery, he said. If there is a rapid solution to the ongoing political impasse, then there could be a far stronger expansion should IMF and foreign funding start to flow in. However, the likelihood of this remains slim in the first half of 2022 at least, he cautioned.

Inflationary pressure on households and businesses are increasing with the pound collapsing further since the start of the year. It is now trading at levels around LBP 30,000/USD on the parallel market, compared to an official exchange rate of LBP 1,507/USD.

Price growth has trended sharply higher once more, hitting 201.1 percent year-on-year in November, for an average of 143.9 percent over the first 11 months of the year. According to Richards, this price growth, "which will remain in play through 2022, will serve to constrain household spending as the rapid price rises in essentials have obliterated any ability to purchase discretionary goods." 

(Reporting by Brinda Darasha; editing by Seban Scaria)

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