Lebanon’s GDP to contract by 11 per cent in 2020
Economy predicted to bounce back by 6 per cent in 2021
Lebanon is likely to suffer a sharp fall in GDP of 11 per cent in 2020 following a recession period in 2018 and 2019, according to a new report by the European Bank for Reconstruction and Development (EBRD), published today.
According to the latest edition of the EBRD Regional Economic Prospects, “regional and domestic political uncertainties culminating in domestic social unrest, slow implementation of reforms and the resulting wait-and-see approach of international partners” have led to the steep contraction. The situation has been exacerbated by a default on debt repayments in March 2020, the ongoing economic crisis and, most recently, the coronavirus pandemic and the associated containment measures.
While the economic outlook remains uncertain, the recovery will depend on the speed of the implementation of key reforms, including debt restructuring in collaboration with the International Monetary Fund. If these reforms are implemented swiftly, the EBRD report expects to see a return to growth of 6 per cent in 2021.
In the EBRD’s southern and eastern Mediterranean region, the negative impact of the coronavirus is expected to be seen in the tourism sector, a decline in domestic demand due to containment measures, a fall in demand from the main trading partners and a slowdown in foreign direct investment.
On average, the economies of the region are expected to shrink by 0.8 per cent in 2020 before rebounding with growth of 4.8 per cent in 2021.
The economies of Jordan, Morocco and Tunisia are expected to contract this year, while Egypt is projected to report a small growth rate of 0.5 per cent.
Economies across the EBRD regions may contract on average by 3.5 per cent this year, with a rebound of 4.8 per cent possible in 2021, the report said, warning that the projections are subject to “unprecedented uncertainty”.
The report assumes a modest impact of the crisis on the long?term trajectory of economic output, with growth resuming towards the end of the third quarter, but potentially significant longer-term economic, political and social effects.
“If social distancing remains in place for much longer than anticipated, the recession may be much deeper, with the 2019 levels of output per capita not attained again for years to come,” the report said.
Across the EBRD regions, containment measures have affected domestic demand and supply. External shocks include a sharp drop in commodity prices, weighing on commodity exporters, disruption to global value chains, a collapse in tourism and a drop in remittances.
The EBRD invests in emerging economies from central and eastern Europe through to Central Asia and the Middle East and North Africa.