How the Beirut blast will fuel a further economic downfall in Lebanon
"With economic and political reforms and adequate support from the international community, Lebanon could navigate the current crisis, " said Iradian of Institute of International Finance
Demonstrators take part in a protest, following Tuesday's blast, in Beirut, Lebanon August 8, 2020.
By Seban Scaria, ZAWYA
The catastrophic explosion at the Beirut port that killed 158 and injured more than 6,000 will deeply impact the Lebanese economy that is already been floundering in debt pile.
"Beirut’s recent massive explosion has deepened the contraction in the Lebanese economy from -15 percent to -22 percent this year, and Nominal GDP in US dollars could decline from $52 billion in 2019 to $33 billion in 2020," Garbis Iradian, Chief Economist - MENA, Institute of International Finance (IIF), told Zawya.
"The sharp depreciation of the Lebanese pound in the parallel market led to an acceleration in the CPI inflation to above 100 percent in July, year-on-year. Unemployment rate has increased to over 30 percent and the poverty level exceeds 40 percent of the population," he added.
The damages are estimated to be in billions of dollars. According to reports, Beirut governor Marwan Abboud said the repair bill for the capital alone will cost up to $5 billion.
Raoul Nehme, Lebanon's minister of the economy, said that without foreign aid the state and central bank have very limited capacity to tackle the impact of the port warehouse explosion that pulverised much of Beirut. According to him, working with the IMF was the only way out for Lebanon, which is neck-deep in debt and was already struggling with a dollar crunch before Tuesday's blast.
Lebanon suspended a $1.2 billion Eurobond payment and is seeking talks with creditors to restructure its entire $90 billion debt pile.
"With economic and political reforms and adequate support from the international community, Lebanon could navigate the current crisis," Iradian noted.
Several countries including the Gulf nations have come forward to help Lebanon overcome the crisis.
French President Emmanuel Macron's visit to Beirut on Thursday promising help and seeking for reforms in the country, raised hope for some recovery next year.
"Macron urged the Lebanese authorities to implement the needed reforms (including fighting corruption and reforming the electricity sector), which could lead to an agreement with the IMF on a recovery plan by October and enable France and the international community to help Lebanon," Iradian said.
"We also expect significant changes at the political level, including a new government in the next few months. Most Lebanese and the international community blame the current political elite for the economic deterioration," he told Zawya.
Meanwhile, protests are raging across Beirut, pinning the blame for the devastating port explosion on the ruling government.
According to reports, more than 110 people were wounded on Saturday in these demonstrations across the city.
Lebanon's Prime Minister Hassan Diab said he would request early parliamentary elections to defuse an escalating political crisis. "We cannot get out of this crisis without early parliamentary elections," he said.
(Reporting by Seban Scaria; editing by Daniel Luiz)
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