The Poor Get Poorer as Lebanon Nears Economic Collapse

Since October 17, Lebanon is witnessing unprecedented popular movements that have paralyzed the country closing schools, institutions, banks and universities in their pursuit of living demands. This prompted Prime Minister Saad Al-Hariri’s resignation in October 29th. However, the delay of parliamentary consultations to appoint a new PM is exacerbating the situation even further.

The strikes and the closure of banks and institutions in Lebanon has exacerbated the economic crisis. On Wednesday, World Bank urged Lebanon to swiftly appoint a new cabinet, indicating the possibility if increased poverty and unemployment in the following months. Meanwhile, thousands of students took to the streets to protest the decision to resume school on the 21st day of the popular revolution.  

The World Bank said in a statement that “the most urgent step is to quickly form a government in line with the aspirations of all Lebanese”. The World Bank noted that it had previously predicted a small recession in 2019, but now they expect the recession to be more severe due to increasing economic and financial strains. World Bank also warned that what is to come may be much more severe if not addressed immediately. “poverty rates may rise up to 50% if the economic situation worsens.” In addition, “Unemployment, especially among the youth, may rise even more drastically than is currently”.

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One of the symptoms of economic deterioration in Lebanon was that growth was almost inexistent last year. The state debt has exceeded $86bn, more than 150% of the GDP, which is one of the highest state debt-to-GDP ratios in the world.

“We are amid an economic collapse. Private businessesare going bankrupt because they can no longer pay for their imports due to the depletion of foreign currencies, and the rationing of the banks.” Said Mohamad Wehbe, an economic analyst to Janoubia. In addition, the Lebanese banks credit rating once again declined to “CAA-2”. In January of this year, Moody’s downgraded Lebanon’s long-term debt rating from B-3 to CAA-1, warning of a further reduction.

“We are extremely close to defaulting.”Wehbe concluded: “Lebanon is due to repay $50bn in the next 5 years in a time of record lows in economic activitiy as well as inexistent growth. In addition to that, political stalemate due to the resignation of the cabinet and the continuing public protests are going to accelerate this economic downturn with no clear alternative in sight.”

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