Publication: Lebanon Economic Monitor - Spring
2023: The Normalization
of Crisis Is No
Road for
Stabilization
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2023-05-15
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2023-07-18
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The systemic failure of Lebanon’s banking system and the collapse of the currency have resulted in a large, dollarized cash-based economy, worth an estimated US$9.86 billion or 45.7 percent of GDP in 2022 (Special Focus: Gauging the Size of the Cash Economy in Lebanon). A pervasive and growing dollarized cash economy is a major impediment to Lebanon’s economic recovery. It not only threatens to compromise the effectiveness of fiscal and monetary policy, but also heightens the risk of money laundering, increases informality, and prompts further tax evasion. Moreover, the increasing reliance on cash transactions also threatens to completely reverse the progress that Lebanon made pre-crisis towards enhancing its financial integrity by instituting robust anti-money laundering mechanisms in its commercial banking sector.
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“World Bank. 2023. Lebanon Economic Monitor - Spring
2023: The Normalization
of Crisis Is No
Road for
Stabilization
. © World Bank. http://hdl.handle.net/10986/40027 License: CC BY-NC 3.0 IGO.”
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Publication Lebanon Economic Monitor, Spring 2023(Washington, DC, 2023-05-15)The systemic failure of Lebanon’s banking system and the collapse of the currency have resulted in a large, dollarized cash-based economy, worth an estimated US$9.86 billion or 45.7 percent of GDP in 2022 (Special Focus: Gauging the Size of the Cash Economy in Lebanon). A pervasive and growing dollarized cash economy is a major impediment to Lebanon’s economic recovery. It not only threatens to compromise the effectiveness of fiscal and monetary policy, but also heightens the risk of money laundering, increases informality, and prompts further tax evasion. Moreover, the increasing reliance on cash transactions also threatens to completely reverse the progress that Lebanon made pre-crisis towards enhancing its financial integrity by instituting robust anti-money laundering mechanisms in its commercial banking sector.Publication Lebanon Economic Monitor, Spring 2016(Washington, DC, 2016-07)The geo-economy presents Lebanon with challenges associated with being a nexus for regional fault lines and risks from its dependence on capital inflows. Despite markedly improved security conditions since the start of 2015, anxiety over regional turmoil and potential spillover effectspersist. All the while, Lebanon continues to be, by far, the largest host of Syrian refugees (in proportion to the population). In addition, the economy’s dependence on its diaspora to finance internal and external imbalances exposes Lebanon to economic and political conditions beyond its influence. Despite these challenges and risks, the political process remains impaired with the vacant presidency completing its second year with uncertain prospects of a near-term resolution. On the other hand, a short-term solution has been found to the garbage crisis that has left piles of trash uncollected on the streets across the country since summer 2015. The Lebanon Economic Monitor provides an update on key economic developments and policies over the past six months. It also presents findings from recent World Bank work on Lebanon. It places them in a longer-term and global context, and assesses the implications of these developments and other changes in policy on the outlook for Lebanon. Its coverage ranges from the macro-economy to financial markets to indicators of human welfare and development.Publication Lebanon Economic Monitor, Spring 2021(World Bank, Washington, DC, 2021-05-31)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.Publication Lebanon Economic Monitor, Spring 2014(Washington, DC, 2014-04)Lebanon faces serious challenges from a volatile security environment and spillovers from the ongoing Syrian conflict which pose serious risks to an already fragile internal political situation. Security incidents have become increasingly more common and the volatile security environment is weakening consumer and investor sentiments and adversely affecting tourism, a central contributor to economic growth and employment in Lebanon. The influx of Syrian refugees to Lebanon persists, with officially registered refugees reaching close to 1 million (i.e., 21.6 percent of Lebanon’s pre-conflict population), which poses significant fiscal, health and educational challenges.Publication Lebanon Economic Monitor, Spring 2017(World Bank, Washington, DC, 2017-04)The election of President Michel Aoun in October 2016 after almost two and a half years of a presidential vacancy, and the subsequent formation of a national unity government have generated hope for the resuscitation of the political process in Lebanon. Nonetheless, the protracted Syrian conflict is markedly worsening the country's vulnerabilities and remains an impediment to the return to potential growth. For the fifth year, Lebanon persists as the largest host (on a per capita basis) for displaced Syrians. In 2016, real GDP growth underwent a slight acceleration to reach an estimated 1.8 percent, compared to 1.3 percent in 2015. This was driven by an improvement in the real estate sector, marking a low threshold-effect from a weak performance in 2015 – cement deliveries expanded by 4.4 percent in 2016 compared to a contraction of 8.6 percent in 2015. Real GDP growth was also boosted by tourist arrivals, an indicator that registered an 11.2 percent growth in 2016. Nonetheless, economic activity persists below potential, inhibited by geopolitical and security conditions, which remain decidedly volatile.
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