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Lebanon’s economic implosion is likely to rank among the top three of the world's worst financial crises since the mid-19th century, the World Bank said in a report released on Tuesday.
In its Spring 2021 edition of the Lebanon Economic Monitor, “Lebanon Sinking: To the Top 3,” the Washington-based multilateral lender said the “dire socio-economic conditions risk systemic national failings” and could have regional and global consequences.
The Mediterranean country’s GDP plummeted from close to $55 billion in 2018 to an estimated $ 33 billion in 2020, with dollar GDP per capita falling by around 40 percent. Real GDP growth is estimated to have contracted by 20.3 percent in 2020, on the back of a 6.7 percent contraction in 2019.
For 2021, the bank said real GDP is likely to contract by a further 9.5 percent, assuming that COVID-19 conditions carry through 2021, while macro policy responses remain inadequate.
Lebanon countered a series of crises like the economic and financial crisis, COVID-19 and the Port of Beirut explosion over a year ago with “deliberately inadequate policy responses,” the bank said.
The inadequate response was due to a combination of a lack of political consensus over effective policy initiatives; and political consensus in defense of a bankrupt economic system, which benefited a few for so long, the World Bank noted.
The social impact of the crisis, which is already dire, could rapidly become catastrophic; more than half the population is likely below the national poverty line, it said.
The report conclude that, leading up to the crisis point, Lebanon’s macroeconomic fundamentals were weak compared to other countries with comparable levels of crises, suggesting that the adjustment process will be more painful and will take longer, even with optimal policy measures in place.
(Reporting by Brinda Darasha; editing by Seban Scaria)
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