Lebanon is the smallest country in continental Asia and their financial woes and image are taking a battering globally. Lebanese economic growth has slowed consistently since 2011 following the Syrian conflict and internal political tensions. They have experienced a sharp decline in 2019 and 2020. Financial difficulties were compounded with a political catastrophe and led to dangerous social remonstrations. As the Lebanese economy was already severely destabilized, the civil unrest, together with the August explosion in Beirut’s port and the Covid-19 outbreak, has created a profound and long-term impact on the country’s socio-economic resilience.
The UAE Ministry of Foreign Affairs and International Cooperation has strongly decried the derogatory and racist statements made by caretaker Lebanese Foreign Minister, Charbel Wehbe, against the Kingdom of Saudi Arabia and other GCC States. The Lebanese ambassador to the UAE was summoned by the MoFAIC and handed over a note of protest denouncing the Lebanese minister’s remarks, which, the ministry affirmed, fly in the face of all diplomatic norms and are inconsistent with the historical relations between Lebanon and all GCC states.
According to the IMF’s updated October 2020 forecast, GDP growth is projected at -25% in 2020. The traditional engines of growth in Lebanon (real estate, construction and tourism) have stalled and the banking sector, which until now has been praised for its resilience, has collapsed. In fact, on 9 March Lebanon failed to repay a $1.2 billion Eurobond, the first sovereign default in the country’s history.
The country’s currency has collapsed to amongst the weakest in the world and the value is so low that nobody knows what Lebanon’s currency is worth anymore. Public debt was estimated at 171.7% in 2020, according to IMF figures updated in October 2020. Lebanon is the third most indebted country in the world, after Japan and Greece. The already high budget deficit has worsened to -12.8% of GDP in 2020. High public debt and a persistent overall deficit limited government action during economic downturns and following the Covid-19 crisis. The IMF estimates inflation at a record high of 85.5% in 2020.
The latest impasse with the Arab countries and Lebanon’s political paralysis have accentuated one of the worst economic and financial crises to engulf the country since 2019, with the international community and Gulf states shying away from providing financial support given a lack of reform and Hezbollah’s tightening grip on the country – no end seems in sight.