BEIRUT – Lebanon’s economic collapse is likely to be one of the worst financial crises in the world since the mid-19th century, the World Bank said in a damn report released Tuesday.
The report predicts that the Lebanese economy will shrink nearly 10 percent in 2021 and stresses that there is “no clear turning point on the horizon”.
Lebanon became insolvent last year with its debts, the currency lost around 85 percent of its value and poverty devastated a country that was once considered a beacon of prosperity in the region.
“The economic and financial crisis is likely to be one of the 10, possibly the 3 worst crisis episodes in the world since the middle of the 19th century,” says the report.
The latest report by the World Bank Economic Monitor Lebanon, titled “Lebanon Sinking: In The Top 3”, states that such brutal economic collapses are usually the result of war.
– Failure of the ruling class –
The complete collapse of the Lebanese economy in the past 18 months is largely attributed to corruption and mismanagement by the country’s hereditary political elite.
“The political response of the Lebanese leadership to these challenges has been extremely inadequate,” the report said.
Lebanon’s ruling class has failed to respond to the country’s worst emergency in a generation, compounded by the coronavirus pandemic and a devastating explosion in the port of Beirut last August.
“The increasingly difficult socio-economic conditions risk systemic national failures with regional and potentially global repercussions,” said the World Bank.
The International Monetary Fund has offered aid, but the country’s political barons have not even formed a government capable of carrying out the reforms on which foreign aid depends.
“In view of the extraordinarily high level of uncertainty, real GDP is expected to shrink by a further 9.5 percent by 2021,” said the World Bank, hoping for a rapid recovery.
According to the monetary institute, the economy contracted by 6.7 percent in 2019 and by 20.3 percent in 2020.
The solutions that the Lebanese authorities have chosen so far to alleviate the financial crisis have weighed heavily on small depositors.
The report warned of “potential triggers for social unrest” in a country with a history of conflict and instability.
“The increasingly difficult socio-economic conditions risk systemic national failures with regional and potentially global repercussions,” it said.
– Long-term effects –
The bankrupt state is unable to pay many of its bills, and Lebanese Energy Minister Raymond Ghajar has warned that electricity supplies will be critical and the country could be plunged into total darkness by the end of June.
“The severe deterioration in basic services would have long-term effects: mass migration, loss of learning, poor health outcomes, lack of adequate safety nets and more,” the report said.
“Permanent damage to human capital would be very difficult to repair,” said the World Bank’s Lebanon Economic Monitor, whose previous report was entitled “The Deliberate Depression”.
“Perhaps this dimension of the Lebanon crisis makes the Lebanon episode unique compared to other global crises,” it said.
Some teachers in Lebanon are now making the equivalent of less than $ 200 a month, doctors are increasingly looking for work abroad, and many students can no longer afford tuition fees.