Lebanon Economic Monitor, Spring 2021 : Lebanon Sinking (to the Top 3)
The Lebanon financial and economic crisis is likely to rank in the top 10, possibly top three, most severe crises episodes globally since the mid-nineteenth century. This is a conclusion of the Spring 2021 Lebanon economic monitor (LEM) in which th...
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| Format: | Report |
| Language: | English |
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World Bank, Washington, DC
2021
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| Online Access: | http://documents.worldbank.org/curated/en/394741622469174252/Lebanon-Economic-Monitor-Lebanon-Sinking-to-the-Top-3 http://hdl.handle.net/10986/35626 |
| Summary: | The Lebanon financial and economic
crisis is likely to rank in the top 10, possibly top three,
most severe crises episodes globally since the
mid-nineteenth century. This is a conclusion of the Spring
2021 Lebanon economic monitor (LEM) in which the Lebanon
crisis is contrasted with the most severe global crises
episodes as observed by Reinhart and Rogoff over the
1857-2013 period. The Lebanon economic monitor provides an
update on key economic developments and policies over the
past six months. Monetary and financial turmoil are driving
crisis conditions, more palpably through interactions
between the exchange rate, narrow money, and inflation. Real
gross domestic product (GDP) growth is estimated to have
contracted by 20.3 percent in 2020, on the back of a 6.7
percent contraction in 2019. The deliberate depression has
further undermined already weak public services via two
effects: (i) it has significantly increased poverty rates
expanding the demography that is not able to afford private
substitutable (the way citizens had previously adapted to
abysmal quality of public services), and are thus more
dependent on public services; and (ii) threatens financial
viability and basic operability of the sector by raising its
costs and lowering its revenues. Lebanon urgently needs to
adopt and implement a credible, comprehensive, and
coordinated macro-financial stability strategy, within a
medium-term macro-fiscal framework. This strategy will be
based on: (i) a debt restructuring program that will achieve
short-term fiscal space and medium-term debt sustainability;
(ii) comprehensively restructuring the financial sector in
order to regain solvency of the banking sector; (iii)
adopting a new monetary policy framework that will regain
confidence and stability in the exchange rate; (iv) a phased
fiscal adjustment aimed at regaining confidence in fiscal
policy; (v) growth enhancing reforms; and (vi) enhanced
social protection. |
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