Lebanon’s Economy Is Expected To Decline Further In 2021

xperts Predict More Economic Decline For Lebanon In 2021
Reuters/Mohamed Azakir

JPMorgan has warned that the Lebanese economy will recess further in what remains of 2020 and in 2021.

In a recent report, the U.S-based multinational investment banking company predicted that the mounting pressure on the government and the delicate conditions of Lebanon will translate to a contraction of -14 percent in 2020 and -4 percent in 2021.

The Lebanese government’s revenues have declined notably in the past few quarters.

This decline has been greatly amplified in the first quarter of 2020 by various factors, one of which is the months-long lockdown, which dealt a serious blow to the country’s vital tourism sector.

According to JPMorgan’s report, the economy contracted by nearly -1.9 percent in 2018 and -6.9 percent in 2019.

Compared to the same period of last year, Lebanon’s public deficit saw a 70.9 percent increase in the past few months after public revenue dropped by around 13.6 percent.

Overall, the report said Lebanon has compounded a deficit of $676 million between the first quarter of 2019 and that of the current year.

Regarding the government’s 5-year rescue plan, JPMorgan sees that any near-term recovery is an extremely difficult task, especially because it does not expect the International Monetary Fund (IMF) to inject any financial assistance to Lebanon.

“We do not expect a quick agreement to be reached with the IMF in the midst of the uncertainty given the debt restructuring plans and differences in the timeline for fiscal reform and the scope of structural reforms, let alone political issues such as Hezbollah representation in the Cabinet,” the report said.

It’s worth noting that the IMF’s financial assistance, which would amount to $10 billion, is one of the key factors of the Lebanese government’s plan for improving the state of the economy.

In addition to the above, JPMorgan expects Lebanon’s foreign currency reserves and, in turn, the Lebanese pound, to remain under pressure in the near future, and capital controls to continue.