The economy of
Lebanon
Lebanon ( , ar, لُبْنَان, translit=lubnān, ), officially the Republic of Lebanon () or the Lebanese Republic, is a country in Western Asia. It is located between Syria to the north and east and Israel to the south, while Cyprus li ...
has been experiencing, as of late 2019, a large-scale, multi-dimensional crisis, including a banking collapse, a
liquidity crisis In financial economics, a liquidity crisis is an acute shortage of ''liquidity''. Liquidity may refer to market liquidity (the ease with which an asset can be converted into a liquid medium, e.g. cash), funding liquidity (the ease with which borrowe ...
and a
sovereign default
A sovereign default is the failure or refusal of the
government of a sovereign state to pay back its debt in full when due. Cessation of due payments (or receivables) may either be accompanied by that government's formal declaration that it wi ...
. It is classified as a
developing, lower-middle-income economy. The
nominal GDP
Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjective nature this measure is often ...
was estimated at $19 billion in 2020,
with a
per capita GDP
Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjective nature this measure is ofte ...
amounting to $2,500. In 2018 government spending amounted to $15.9 billion, or 23% of GDP.
The economy significantly expanded after the
2006 Lebanon War
The 2006 Lebanon War, also called the 2006 Israel–Hezbollah War and known in Lebanon as the July War ( ar, حرب تموز, ''Ḥarb Tammūz'') and in Israel as the Second Lebanon War ( he, מלחמת לבנון השנייה, ''Milhemet Leva ...
, with growth averaging 9.1% between 2007 and 2010.
After 2011, the local economy was affected by the
Syrian civil war, growing by a yearly average of 1.7% on the 2011–2016 period and by 1.5% in 2017.
In 2018, the size of the GDP was estimated to be $54.1 billion.
Lebanon is the third-highest indebted country in the world in terms of
debt-to-GDP ratio
In economics, the debt-to-GDP ratio is the ratio between a country's government debt (measured in units of currency) and its gross domestic product (GDP) (measured in units of currency per year). While it is a "ratio", it is technically measured i ...
. As a consequence, interest payments consumed 48% of domestic government revenues in 2016, thus limiting the government's ability to make needed investments in infrastructure and other public goods.
The Lebanese economy is service-oriented. Lebanon has a strong tradition of ''
laissez-faire
''Laissez-faire'' ( ; from french: laissez faire , ) is an economic system in which transactions between private groups of people are free from any form of economic interventionism (such as subsidies) deriving from special interest groups. ...
'', with the
country's constitution stating that "the economic system is free and ensures private initiative and the right to private property". The major economic sectors include metal products, banking, agriculture, chemicals, and transport equipment. The main growth sectors include banking and tourism. There are no restrictions on foreign exchange or capital movement.
History
![Beirut 002](https://upload.wikimedia.org/wikipedia/commons/3/3f/Beirut_002.jpg)
The 1975–1990
Lebanese Civil War
The Lebanese Civil War ( ar, الحرب الأهلية اللبنانية, translit=Al-Ḥarb al-Ahliyyah al-Libnāniyyah) was a multifaceted armed conflict that took place from 1975 to 1990. It resulted in an estimated 120,000 fatalities a ...
seriously damaged
Lebanon
Lebanon ( , ar, لُبْنَان, translit=lubnān, ), officially the Republic of Lebanon () or the Lebanese Republic, is a country in Western Asia. It is located between Syria to the north and east and Israel to the south, while Cyprus li ...
's economic
infrastructure
Infrastructure is the set of facilities and systems that serve a country, city, or other area, and encompasses the services and facilities necessary for its economy, households and firms to function. Infrastructure is composed of public and priv ...
, cut national output by half,
and had major consequences for Lebanon's position as a
Middle East
The Middle East ( ar, الشرق الأوسط, ISO 233: ) is a geopolitical region commonly encompassing Arabian Peninsula, Arabia (including the Arabian Peninsula and Bahrain), Anatolia, Asia Minor (Asian part of Turkey except Hatay Pro ...
ern
entrepot and
bank
A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets.
Because ...
ing hub.
[Lebanon](_blank)
''The World Factbook
''The World Factbook'', also known as the ''CIA World Factbook'', is a reference resource produced by the Central Intelligence Agency (CIA) with almanac-style information about the countries of the world. The official print version is available ...
''. Central Intelligence Agency
The Central Intelligence Agency (CIA ), known informally as the Agency and historically as the Company, is a civilian foreign intelligence service of the federal government of the United States, officially tasked with gathering, processing, ...
. After the war, the central government regained its ability to collect taxes and control key port and government facilities. As a result, GDP per capita expanded 353% in the 1990s.
Economic recovery has been helped by a financially sound banking system and resilient small- and medium-scale manufacturers, with family remittances, banking services, manufactured and farm exports, and international aid as the main sources of foreign exchange.
Lebanon's economy has made impressive gains since the launch of "Horizon 2000," the government's $20 billion reconstruction program in 1993. Real
GDP
Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjective nature this measure is often ...
grew 8% in 1994 and 7% in 1995 before
Israel
Israel (; he, יִשְׂרָאֵל, ; ar, إِسْرَائِيل, ), officially the State of Israel ( he, מְדִינַת יִשְׂרָאֵל, label=none, translit=Medīnat Yīsrāʾēl; ), is a country in Western Asia. It is situated ...
's
Operation Grapes of Wrath
Operation Grapes of Wrath ( he, מבצע ענבי זעם ''Mivtsa Enavi Zaam''), known in Lebanon as the April Aggression (), is the seventeen-day campaign of the Israeli Defense Forces against Hezbollah in 1996 which attempted to end rocket att ...
in April 1996 stunted economic activity. Real GDP grew at an average annual rate of less than 3% per year for 1997 and 1998 and only 1% in 1999. During 1992–98, annual inflation fell from more than 100% to 5%, and
foreign exchange reserves
Foreign exchange reserves (also called forex reserves or FX reserves) are cash and other reserve assets such as gold held by a central bank or other monetary authority that are primarily available to balance payments of the country, influence ...
jumped to more than $6 billion from $1.4 billion. Burgeoning capital inflows have generated foreign payments surpluses, and the Lebanese pound has remained relatively stable. Progress also has been made in rebuilding Lebanon's war-torn physical and financial infrastructure.
Solidere
Solidere s.a.l. is a Lebanese joint-stock company in charge of planning and redeveloping Beirut Central District following the conclusion, in 1990, of the Lebanese Civil War. By agreement with the government, Solidere has special powers of emin ...
, a $2-billion firm, is managing the reconstruction of Beirut's
central business district
A central business district (CBD) is the commercial and business centre of a city. It contains commercial space and offices, and in larger cities will often be described as a financial district. Geographically, it often coincides with the "city ...
; the
stock market
A stock market, equity market, or share market is the aggregation of buyers and sellers of stocks (also called shares), which represent ownership claims on businesses; these may include ''securities'' listed on a public stock exchange, as ...
reopened in January 1996, and international banks and insurance companies are returning. The government nonetheless faces serious challenges in the economic arena. It has had to fund reconstruction by tapping foreign exchange reserves and boosting borrowing. Reducing the government budget deficit is a major goal of the current government. The gap between rich and poor grew in the 1990s, resulting in popular dissatisfaction over the skewed distribution of the reconstruction's benefits and leading the government to shift its focus from rebuilding infrastructure to improving living conditions.
After the end of the civil war, Lebanon enjoyed considerable stability, Beirut's reconstruction was almost complete, and increasing numbers of tourists poured into the nation's resorts.
The economy witnessed growth, with bank assets reaching over US$75 billion,
Market capitalization
Market capitalization, sometimes referred to as market cap, is the total value of a publicly traded company's outstanding common shares owned by stockholders.
Market capitalization is equal to the market price per common share multiplied by t ...
was also at an all-time high, estimated at $10.9 billion at the end of the second quarter of 2006.
The month-long
2006 war severely damaged Lebanon's economy, especially the tourism sector. Over the course of 2008 Lebanon rebuilt its infrastructure mainly in the real estate and tourism sectors, resulting in a comparatively robust post war economy. Major contributors to the reconstruction of Lebanon include
Saudi Arabia
Saudi Arabia, officially the Kingdom of Saudi Arabia (KSA), is a country in Western Asia. It covers the bulk of the Arabian Peninsula, and has a land area of about , making it the fifth-largest country in Asia, the second-largest in the A ...
(with US$1.5 billion pledged), the European Union (with about $1 billion) and a few other Persian Gulf countries with contributions of up to $800 million.
Given the frequent security turmoil it has faced, the Lebanese banking system has adopted a conservative approach, with strict regulations imposed by the central bank to protect the economy from political instability. These regulations have generally left Lebanese banks unscathed by the
financial crisis of 2007–2008
Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of fi ...
. Lebanese banks remain, under the current circumstances, high on liquidity and reputed for their security.
In late 2008,
Moody's
Moody's Investors Service, often referred to as Moody's, is the bond credit rating business of Moody's Corporation, representing the company's traditional line of business and its historical name. Moody's Investors Service provides international ...
shifted Lebanon's sovereign rankings from stable to positive, acknowledging its financial security. Moreover, with an increase of 51% in the
Beirut stock market, the index provider
MSCI
MSCI Inc. is an American finance company headquartered in New York City. MSCI is a global provider of equity, fixed income, real estate indexes, multi-asset portfolio analysis tools, ESG and climate products. It operates the MSCI World, MSCI All ...
ranked Lebanon the world's best performer in 2008.
Lebanon is one of the only seven countries in the world in which the value of the stock market increased in 2008.
The Lebanese economy experienced continued resilience, growing 8.5 percent in 2008, 7 percent in 2009 and 8.8% in 2010. However, Lebanon's debt to GDP ratio remained one of the highest in the world.
The International Monetary Fund issued a second report on Lebanon in October 2015, where its expectations of the economic growth rate were lowered to 2%, compared to the 2.5% growth rate of the first report, released in April 2015.
In October 2019,
Lebanon
Lebanon ( , ar, لُبْنَان, translit=lubnān, ), officially the Republic of Lebanon () or the Lebanese Republic, is a country in Western Asia. It is located between Syria to the north and east and Israel to the south, while Cyprus li ...
witnessed nationwide protests that erupted over the country's deteriorating economic conditions. Thousands of demonstrations took to the streets of downtown
Beirut
Beirut, french: Beyrouth is the capital and largest city of Lebanon. , Greater Beirut has a population of 2.5 million, which makes it the third-largest city in the Levant region. The city is situated on a peninsula at the midpoint o ...
, calling for the government of Prime Minister
Saad al-Hariri
Saad El-Din Rafik Al-Hariri ( ar, سعد الدين رفيق الحريري, translit=Saʿd ad-Dīn Rafīq al-Ḥarīrī; born 18 April 1970) is a Lebanese-Saudi politician who served as the Prime Minister of Lebanon, prime minister of Lebanon f ...
to quit over "its utter failure to stop the deterioration of the economic and living conditions in the country". The protests began after the government announced to charge 20 cents per day for
voice over internet protocol (VOIP) use over social media apps, including
WhatsApp
WhatsApp (also called WhatsApp Messenger) is an internationally available freeware, cross-platform, centralized instant messaging (IM) and voice-over-IP (VoIP) service owned by American company Meta Platforms (formerly Facebook). It allows us ...
,
Facebook
Facebook is an online social media and social networking service owned by American company Meta Platforms. Founded in 2004 by Mark Zuckerberg with fellow Harvard College students and roommates Eduardo Saverin, Andrew McCollum, Dustin M ...
, and other applications.
During the early part of 2020,
the central Bdl melted down and the government needed recourse to the IMF for a shortfall of $50 billion.
On 4 August 2020, the
explosion of 2,750 tons ammonium nitrate in a
Beirut
Beirut, french: Beyrouth is the capital and largest city of Lebanon. , Greater Beirut has a population of 2.5 million, which makes it the third-largest city in the Levant region. The city is situated on a peninsula at the midpoint o ...
port warehouse caused the destruction of the "only large grain silo" in the country,
in addition to more than 200 people killed and several square kilometres of pulverised buildings in the downtown core of the city. By 9 August,
Emmanuel Macron
Emmanuel Macron (; born 21 December 1977) is a French politician who has served as President of France since 2017. ''Ex officio'', he is also one of the two Co-Princes of Andorra. Prior to his presidency, Macron served as Minister of Econ ...
had counted over 250 million euros of global contributions to the relief effort.
On 10 August, the government of
Hassan Diab
Hassan Diab ( ar, حسان دياب, Ḥassān Dyāb; born 1 June 1959) is a Lebanese academic, engineer and politician who served as the 37th Prime Minister of Lebanon, prime minister of Lebanon from 21 January 2020 to 10 September 2021. He was ...
resigned.
The day before,
IMF director
Kristalina Georgieva
Kristalina Ivanova Georgieva-Kinova ( bg, Кристалина Иванова Георгиева-Кинова; ; born 13 August 1953) is a Bulgarian economist serving as managing director of the International Monetary Fund since 2019. She was t ...
had laid down four conditions for the co-operation of her organization:
*restoring the financial solvency of the state,
*cutting losses at state-owned companies,
*passing a law to regulate capital outflows and
*setting up a social safety net.
On 14 August, the
(UNOCHA) launched a $565 million appeal for donors of aid to victims of the explosions. The UN effort was to focus on: meals, first aid, shelters, and repair of schools. Some of the money that Macron collected would be used by the UNOCHA.
2019–present economic crisis
According to a
World Bank
The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Interna ...
report, Lebanon's economy which was structurally strained before the Syrian shock suffered a real blow as an aftermath of the Syrian crisis which brought around 1.5 million Syrian refugees into Lebanon. The GDP growth rate declined to around 1 percent in 2018. In August 2019, the
USD
The United States dollar (symbol: $; code: USD; also abbreviated US$ or U.S. Dollar, to distinguish it from other dollar-denominated currencies; referred to as the dollar, U.S. dollar, American dollar, or colloquially buck) is the official ...
parallel exchange rate started changing from the official exchange rate; the official exchange rate for the USD had been
£L1,507.5 since 1997, while the parallel exchange rate was £L1,600 in the fall of 2019 and would increase to around £L4,200 in May 2020.
The USD parallel exchange rate is increasing because of the dollar shortage in Lebanon. In a bid to lower the dollar price, the central bank made an agreement with the licensed exchangers to make the official rates on offer at £L3,860/3,910.
However, despite the central bank's efforts, on 23 June 2020, the black market dollar reached a staggering rate of £L 6,075 devaluing the Lebanese pound by 75%. This dollar shortage also caused 785 restaurants and cafes to close between September 2019 and February 2020 and caused 25,000 employees to lose their jobs. This economic crisis made Lebanon's
gross domestic product
Gross domestic product (GDP) is a money, monetary Measurement in economics, measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjec ...
fall to about $44 billion, which was about $55 billion the year before. The crisis became worse when the
COVID-19 pandemic
The COVID-19 pandemic, also known as the coronavirus pandemic, is an ongoing global pandemic of coronavirus disease 2019 (COVID-19) caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2). The novel virus was first identif ...
affected the Lebanese economy. In 2020, the country defaulted for the first time on $30 billion in bonds and tried to seek help from the IMF but the negotiations never reached fruition.
The liquidity crisis also lead to a restriction on the withdrawals from US dollar bank accounts. Depositors needed to preserve the value of their savings, especially following press reports about possible haircuts and restructuring of the banking sector. They therefore turned to buying real estate.
For example, revenues from land sales of the major real estate developer,
Solidere
Solidere s.a.l. is a Lebanese joint-stock company in charge of planning and redeveloping Beirut Central District following the conclusion, in 1990, of the Lebanese Civil War. By agreement with the government, Solidere has special powers of emin ...
company, soared from nearly $1.3 million to $234.5 million.
Also, these depositors turned to buying shares in Solidere company, which lead to a rise of 500% in its price between the start of the liquidity crisis and April 2021.
The already battered economy of Lebanon suffered fresh blow with the port blast on 4 August 2020. Economists have claimed that the blasts could result in the contraction of Beirut's GDP by around 20–25% for the year. The current figure surpasses IMF's last forecast of 12% crash in GDP because of the ongoing and increasing economic and political crisis in Lebanon.
In March 2021, Lebanon approved an emergency assistance package from the World Bank worth $246 million in order to support struggling families and strengthen the social safety and try to face the economic crisis.
On March 16, as the Lebanese pound jumped on the black market from £L13,000 to £L15,000 against the US dollar, protesters took to the streets, grocery stores closed and bakeries threatened to close.
After the meeting of the President Aoun and Prime Minister-designate Saad Hariri on March 18, the Lebanese pound dropped from £L15,000 against the dollar on the black market to £L12,500.
Causes
= External debt
=
After the civil war, the Lebanese government resorted to massive borrowing to finance its post-war restructuring. The yearly growth of gross debt between 1993 and 1995 was 123 percent and between 1995 and 2000 was 171 percent. Between 2005 and 2018, the yearly growth of debt has averaged around 22 percent and in comparison, the GDP growth rate for the same period has been in single digits with an exception of 2009. This high debt has caused Lebanon to spend a big chunk of its revenues in debt servicing, on an average, close to 45 percent is spent by the government as interest payments. In 1996, interest payments made up almost 68 percent of that year's budget deficit. With debt piling up and growth being minuscule, Lebanon's debt to GDP ratio reached 178 percent by the end of 2019, which makes it the third most indebted country after
Greece
Greece,, or , romanized: ', officially the Hellenic Republic, is a country in Southeast Europe. It is situated on the southern tip of the Balkans, and is located at the crossroads of Europe, Asia, and Africa. Greece shares land borders with ...
and
Japan
Japan ( ja, 日本, or , and formally , ''Nihonkoku'') is an island country in East Asia. It is situated in the northwest Pacific Ocean, and is bordered on the west by the Sea of Japan, while extending from the Sea of Okhotsk in the north ...
. In 2020, Beirut defaulted on a $1.2 billion Eurobond, the first sovereign default since in its history. The nation is currently in discussions with a group of creditors about a possible restructuring of a defaulted Eurobond.
A successful restructuring would allow the country to again access external credit markets.
= Currency crisis
=
Lebanon's national currency, the Lebanese pound is pegged to the US dollar at £L1,507 to US$1. This fixed rate has been unstable due to the depreciating value of the pound in the black market. According to reports, the pound was trading at £L8,100 to US$1 in 2019 on the black market. The causes of the pound's depreciation can be traced back to the economy's dependence on imports. Lebanon in 2018 imported US$20 bn worth of goods and exported goods worth only US$3 bn.
This
trade deficit
The balance of trade, commercial balance, or net exports (sometimes symbolized as NX), is the difference between the monetary value of a nation's exports and imports over a certain time period. Sometimes a distinction is made between a balance ...
also widened as the remittances share, which was around 24 percent in 2008 declined to nearly 12 percent in 2018. This coupled with geopolitical tensions of the region, caused the Pound-Dollar peg rate to wither. As a response, the
central bank
A central bank, reserve bank, or monetary authority is an institution that manages the currency and monetary policy of a country or monetary union,
and oversees their commercial banking system. In contrast to a commercial bank, a central ba ...
resorted to more borrowing and also issued a directive that required all money transfer offices to cash out transfers in the local currency, further exacerbating the dollar crunch.
= Corruption and political instability
=
After
a devastating explosion in Beirut on 4 August 2020 that killed at least 200 people, the government, headed by Prime Minister
Hassan Diab
Hassan Diab ( ar, حسان دياب, Ḥassān Dyāb; born 1 June 1959) is a Lebanese academic, engineer and politician who served as the 37th Prime Minister of Lebanon, prime minister of Lebanon from 21 January 2020 to 10 September 2021. He was ...
, announced that his government was stepping down. In his speech, Mr. Diab said that corruption cases were widespread in the country's political and administrative landscape; other calamities hiding in many minds and warehouses, and which pose a great threat, are protected by the class that controls the fate of the country.
According to reports, the financial troubles and political inaction had caused growing anger and frustration among people who began protesting in October last year. Protesters demanded an end to corruption and the resignation of political leaders including the then Prime Minister
Saad al-Hariri
Saad El-Din Rafik Al-Hariri ( ar, سعد الدين رفيق الحريري, translit=Saʿd ad-Dīn Rafīq al-Ḥarīrī; born 18 April 1970) is a Lebanese-Saudi politician who served as the Prime Minister of Lebanon, prime minister of Lebanon f ...
. This year, the newly formed government under Diab faced the same accusations of corruption.
In November 2019, The central bank of Lebanon was accused of running a Ponzi scheme as it relied on fresh borrowing to service its debt. The bank denied the allegations stating that its action was in par with the 1963 Code of Money and Credit. Amidst the failing banking system, banks resorted to putting informal curbs on dollar withdrawals and international transfers, stirring mass protests and police violence. The pandemic brought the protests to a halt for some time but the port explosion in Beirut once again brought people to the streets, who, as reports state, have lost faith in the political elite.
Some estimates state that half of Lebanon's population is living near or
below the poverty line and thousands of people have lost their jobs. There have been incessant power cuts and some residents have been calling the blackouts worse than those witnessed in the 1975–1990 civil war.
Trade
![Lebanon trade 2017](https://upload.wikimedia.org/wikipedia/commons/0/01/Lebanon_trade_2017.png)
Lebanon's trade balance is structurally negative. In 2017, the trade deficit reached $20.3 billion. The country imported $23.1 billion
worth of goods and services, and exported $2.8 billion.
Lebanon has a competitive and
free market
In economics, a free market is an economic system in which the prices of goods and services are determined by supply and demand expressed by sellers and buyers. Such markets, as modeled, operate without the intervention of government or any o ...
regime and a strong
laissez-faire
''Laissez-faire'' ( ; from french: laissez faire , ) is an economic system in which transactions between private groups of people are free from any form of economic interventionism (such as subsidies) deriving from special interest groups. ...
commercial tradition. The Lebanese economy is service-oriented; main growth sectors include banking and tourism. There are no restrictions on foreign exchange or capital movement.
Food security
Food accounted for 18% of the dollar value of the imports to Lebanon in 2018, according to
World Bank
The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Interna ...
statistics.
Wheat and livestock are two foodstuffs for which Lebanon is import-dependent.
Around 90 percent of imported wheat is sourced from
Ukraine
Ukraine ( uk, Україна, Ukraïna, ) is a country in Eastern Europe. It is the second-largest European country after Russia, which it borders to the east and northeast. Ukraine covers approximately . Prior to the ongoing Russian inv ...
and
Russia
Russia (, , ), or the Russian Federation, is a List of transcontinental countries, transcontinental country spanning Eastern Europe and North Asia, Northern Asia. It is the List of countries and dependencies by area, largest country in the ...
.
The wheat reserves of Lebanon are kept in silos at the Port of Beirut and cover about three months of consumption.
In 2019, domestic wheat production measured 130,000 tons, while wheat imports measured 570,000 tons.
The
food security
Food security speaks to the availability of food in a country (or geography) and the ability of individuals within that country (geography) to access, afford, and source adequate foodstuffs. According to the United Nations' Committee on World F ...
of Lebanon is a subject of debate. On the one hand, administrators of the
UNESCWA
The United Nations Economic and Social Commission for West Asia (ESCWA; ar, الإسكوا) is one of five regional commissions under the jurisdiction of the United Nations Economic and Social Council. The role of the Commission is to promote e ...
used the
World Food Programme
The World Food Programme; it, Programma alimentare mondiale; es, Programa Mundial de Alimentos; ar, برنامج الأغذية العالمي, translit=barnamaj al'aghdhiat alealami; russian: Всемирная продовольствен ...
in May 2016 to sell the story that the country imports up to 80% of its needs.
On the other hand, domestic audiences are told that the country is almost self-sufficient in food:
Corruption
According to NGO
Transparency International
Transparency International e.V. (TI) is a German registered association founded in 1993 by former employees of the World Bank. Based in Berlin, its nonprofit and non-governmental purpose is to take action to combat global corruption with civil ...
Lebanon ranks 138th out of 180 countries surveyed on the
corruption perception index
The Corruption Perceptions Index (CPI) is an index which ranks countries "by their perceived levels of public sector corruption, as determined by expert assessments and opinion surveys." The CPI generally defines corruption as an "abuse of entr ...
. A poll
conducted by Transparency International in 2016 indicated that 92% of Lebanese thought that corruption had increased that year. Moreover 67% of the respondents indicated that they believed that the majority of the political and economical elites were corrupted, and 76% indicated that the government was doing poorly when it came to fighting corruption.
As of July 2020,
Riad Salamé
Riad Toufic Salameh (Arabic: رياض توفيق سلامة, born July 17, 1950) is the current Governor of Lebanon's central bank, Banque du Liban since April 1993. He was appointed Governor by decree, approved by the Council of Ministers for ...
, Governor of
Banque du Liban
Banque du Liban (BdL, ar, مصرف لبنان, English: Bank of Lebanon) is the central bank of Lebanon. It was established on August 1, 1963, and became fully operational on April 1, 1964. It is currently headed by Riad Salameh.
One of the ma ...
(the country's central bank) since 1993, has had assets frozen, and is facing an October hearing accused of the embezzlement of central bank assets, and the mismanagement of public funds.
The already suffering country was struck by a
huge explosion on 4 August 2020. The explosion devastated the Port of Beirut and destroyed many houses, leaving almost 300,000 people homeless. This explosion has led to the demolition of the country's main harbor that was used to import food.
Inequality
The top 1% richest adults receive approximately a quarter of the total national income, placing Lebanon among the most unequal countries in the world.
The bottom 50% of the population is left with 10% of total national income.
Lebanon is characterized by a dual social structure, with an extremely rich group at the top, whose income levels are comparable to their counterparts in high-income countries, and a much poorer mass of the population, as in many developing countries. This polarized structure reflects the absence of a broad "middle class": While the middle 40% receives more than the share accruing to the top 10% in Western Europe, and a bit less in the US, it is left with far less income than the top 10% in Lebanon (between 20 and 30 p.p less). The richest captured most of the income growth since 2005: The top 10% saw its income increase by 5 to 15%, while the bottom 50% saw it decrease by 15% and the poorest 10% by a quarter.
Lebanese billionaires' wealth represents on average, between 2005 and 2016, 20% of national income as opposed to 2% in China, 5% in France, and 10% in the US.
Fiscal haven
In 2018 Lebanon ranked 11th on the
Financial Secrecy Index
The Financial Secrecy Index (FSI) is a report published by the advocacy organization Tax Justice Network (TJN) which ranks countries by ''financial secrecy indicators'', weighted by the economic flows of each country.
It looks at how wealthy ...
. Lebanon has a strong history of
banking secrecy
Banking secrecy, alternately known as financial privacy, banking discretion, or bank safety,Guex (2000), p. 240 is a conditional agreement between a bank and its clients that all foregoing activities remain secure, confidential, and private. Mos ...
but has taken steps to fight
money laundering
Money laundering is the process of concealing the origin of money, obtained from illicit activities such as drug trafficking, corruption, embezzlement or gambling, by converting it into a legitimate source. It is a crime in many jurisdictions ...
and
tax evasion
Tax evasion is an illegal attempt to defeat the imposition of taxes by individuals, corporations, trusts, and others. Tax evasion often entails the deliberate misrepresentation of the taxpayer's affairs to the tax authorities to reduce the taxp ...
in recent years. As of January 2019, banking secrecy applies to Lebanese nationals living in Lebanon but is not applicable to US citizens and US fiscal residents since the
FATCA
The Foreign Account Tax Compliance Act (FATCA) is a 2010 United States federal law requiring all non-U.S. foreign financial institutions (FFIs) to search their records for customers with indicia of a connection to the U.S., including indication ...
agreement was introduced. Lebanon is part of the
and has signed an agreement to exchange fiscal data with other countries, but as of January 2019, it is not compliant with certain provisions of the treaty.
Ali Hassan Khalil
Ali Hassan Khalil ( ar, علي حسن خليل; born 15 July 1964) is a Lebanese politician, Member of Parliament, and former Minister of Finance.
Khalil is described as the "second most powerful man" in Amal behind Parliament Speaker Nabih ...
, Finance Minister, confirmed that 2019's draft budget showed a deficit of less than 9% of GDP compared to 11.2% in 2018. Khalil also claimed that the economic growth forecast of 1.5 percent could go up to 2% in 2019.
Foreign investment
There are few restrictions on foreign investment, barring
Israel
Israel (; he, יִשְׂרָאֵל, ; ar, إِسْرَائِيل, ), officially the State of Israel ( he, מְדִינַת יִשְׂרָאֵל, label=none, translit=Medīnat Yīsrāʾēl; ), is a country in Western Asia. It is situated ...
i citizens and entities. There are no country-wide U.S. trade sanctions against Lebanon, although
Hezbollah
Hezbollah (; ar, حزب الله ', , also transliterated Hizbullah or Hizballah, among others) is a Lebanese Shia Islamist political party and militant group, led by its Secretary-General Hassan Nasrallah since 1992. Hezbollah's parami ...
and individuals associated with it have been targeted by the American government. Foreign ownership of real estate is legal under certain conditions.
According to a report by ''
The Wall Street Journal
''The Wall Street Journal'' is an American business-focused, international daily newspaper based in New York City, with international editions also available in Chinese and Japanese. The ''Journal'', along with its Asian editions, is published ...
'', "Lebanon has one of the world's highest public debt-to-gross domestic product ratios, rising to over 150% as it takes on more debt to plug budget holes." In January 2019, in a move to boost the economy of Lebanon and help the country overcome its debts, Qatar pledged to buy $500 million's worth of government bonds. In June 2019,
Bloomberg Bloomberg may refer to:
People
* Daniel J. Bloomberg (1905–1984), audio engineer
* Georgina Bloomberg (born 1983), professional equestrian
* Michael Bloomberg (born 1942), American businessman and founder of Bloomberg L.P.; politician and ma ...
reported that Qatar had bought some of the bonds and planned to complete the rest of the investment soon.
Remittances
Lebanon benefits from its large, cohesive, and entrepreneurial
diaspora
A diaspora ( ) is a population that is scattered across regions which are separate from its geographic place of origin. Historically, the word was used first in reference to the dispersion of Greeks in the Hellenic world, and later Jews after ...
. Over the course of time, emigration has yielded Lebanese "commercial networks" throughout the world. As a result,
remittances
A remittance is a non-commercial transfer of money by a foreign worker, a member of a diaspora community, or a citizen with familial ties abroad, for household income in their home country or homeland. Money sent home by migrants competes with ...
from Lebanese abroad to family members within the country total $8.2 billion and account for one fifth of the country's economy. Nassib Ghobril, the head of research and analysis for Byblos Bank, calculates that Lebanese abroad supply Lebanon with about $1,400 per capita every year.
Investment
The stock
market capitalization
Market capitalization, sometimes referred to as market cap, is the total value of a publicly traded company's outstanding common shares owned by stockholders.
Market capitalization is equal to the market price per common share multiplied by t ...
of listed companies in Lebanon was valued at $9.6 billion in January 2019, down from $11.5 billion in January 2018
Lebanon was unable to attract significant foreign aid to help it rebuild from both the long civil war (1975–89) and the
Israeli occupation of the south (1978–2000). In addition, the delicate social balance and the near- dissolution of central government institutions during the civil war handicapped the state as it sought to capture revenues to fund the recovery effort. Thus it accumulated significant debt, which by 2001 had reached $28 billion, or nearly 150% of GDP. Economic performance was sluggish in 2000 and 2001 (zero growth in 2000, and estimates between 1.0 and 1.4% in 2001, largely attributed to slight increases in tourism, banking, industry, and construction). Unemployment is estimated at 14% for 2000 and 29% among the 15-24-year age group, with preliminary estimates of further increases in 2001. However, many Lebanese expatriates have been able to return to the country due to the negative financial situations they are facing abroad, due to the global economic crisis. Also, more job opportunities are attracting more Lebanese youths for a chance to return and work in Lebanon, and also a benefit for the Lebanese living in the country, graduating from universities.
Reforms
Lebanon's current program of reforms focuses on three main pillars:
![American-University-Beirut-NW](https://upload.wikimedia.org/wikipedia/commons/9/95/American-University-Beirut-NW.jpg)
* Economic revival and
sustainable growth
Sustainable development is an organizing principle for meeting human development goals while also sustaining the ability of natural systems to provide the natural resources and ecosystem services on which the economy and society depend. The desir ...
, with the private sector as the engine of growth;
* Fiscal consolidation and structural improvement in public sector finances; and
* Monetary, financial, and price stability.
The government also has maintained a firm commitment to the Lebanese pound, which has been pegged to the dollar since September 1999. In late 2000, the government substantially reduced customs duties, adopted export promotion schemes for agriculture, decreased social security fees and restrictions on investment in real estate by foreigners, and adopted an open-skies policy, with positive effects on trade in 1991. Nonetheless, the relative appreciation of the Lebanese currency has undermined competitiveness, with merchandise exports falling from 23% of GDP in 1989 to 4% in 2000.
In 2001, the government turned its focus to fiscal measures, Increasing gasoline taxes, reducing expenditures, and approving a value-added-tax that became effective in February 2002. Slow money growth and
dollarization
Currency substitution is the use of a foreign currency in parallel to or instead of a domestic currency. The process is also known as dollarization or euroization when the foreign currency is the dollar or the euro, respectively.
Currency subs ...
of deposits have hampered the ability of commercial banks to finance the government, leaving more of the burden to the
central bank
A central bank, reserve bank, or monetary authority is an institution that manages the currency and monetary policy of a country or monetary union,
and oversees their commercial banking system. In contrast to a commercial bank, a central ba ...
. This monetization of the fiscal deficit has put enormous pressure on central bank reserves, mitigated only slightly with the issuance of new
Eurobonds
Eurobond may refer to:
* Eurobond (external bond)
A eurobond is an international bond that is denominated in a currency not native to the country where it is issued. They are also called external bonds. They are usually categorised according t ...
over the past 2 years. The central bank has maintained a stable currency by intervening directly in the market, as well as low inflation, and succeeded in maintaining investors' confidence in debt. It has done so at a cost, however, as international reserves declined by $2.4 billion in 2000 and by $1.6 billion in the first half of 2001.
For 2002, the government has put primary emphasis on privatization, initially in the telecom sector and electricity, with continued planning for sales of the state airline, Beirut port, and water utilities. The government has pledged to apply the proceeds of sales to reducing the public debt and the budget deficit. In addition, it projects that privatization will bring new savings as government payrolls are pared, interest rates decline, and private sector growth and foreign investment are stimulated. The government also is tackling the daunting task of administrative reform, aiming to bring in qualified technocrats to address ambitious economic programs, and reviewing further savings that can be realized through reforms of the income tax system. The Lebanese Government faces major challenges in order to meet the requirements of a
fiscal adjustment program focusing on tax reforms and modernization, expenditure rationalization, privatization, and improved debt management.
![Montagnes Faraya](https://upload.wikimedia.org/wikipedia/commons/3/33/Montagnes_Faraya.jpg)
The U.S. enjoys a strong exporter position with Lebanon, generally ranking as Lebanon's fourth-largest source of imported goods. More than 160 offices representing U.S. businesses currently operate in Lebanon. Since the lifting of the passport restriction in 1997 (see below), a number of large U.S. companies have opened branches or regional offices, including
Microsoft
Microsoft Corporation is an American multinational technology corporation producing computer software, consumer electronics, personal computers, and related services headquartered at the Microsoft Redmond campus located in Redmond, Washing ...
,
American Airlines
American Airlines is a major airlines of the United States, major US-based airline headquartered in Fort Worth, Texas, within the Dallas–Fort Worth metroplex. It is the Largest airlines in the world, largest airline in the world when measured ...
,
Coca-Cola
Coca-Cola, or Coke, is a carbonated soft drink manufactured by the Coca-Cola Company. Originally marketed as a temperance drink and intended as a patent medicine, it was invented in the late 19th century by John Stith Pemberton in Atlanta ...
,
FedEx
FedEx Corporation, formerly Federal Express Corporation and later FDX Corporation, is an American multinational conglomerate holding company focused on transportation, e-commerce and business services based in Memphis, Tennessee. The name "Fe ...
,
UPS
UPS or ups may refer to:
Companies and organizations
* United Parcel Service, an American shipping company
** The UPS Store, UPS subsidiary
** UPS Airlines, UPS subsidiary
* Underground Press Syndicate, later ''Alternative Press Syndicate'' or ...
,
General Electric
General Electric Company (GE) is an American multinational conglomerate founded in 1892, and incorporated in New York state and headquartered in Boston. The company operated in sectors including healthcare, aviation, power, renewable energ ...
,
Parsons Brinckerhoff
WSP USA, formerly WSP, Parsons Brinckerhoff and Parsons Brinckerhoff, is a multinational engineering and design firm with approximately 14,000 employees. WSP stands for Williams Sale Partnership. The firm operates in the fields of strategic con ...
,
Cisco Systems
Cisco Systems, Inc., commonly known as Cisco, is an American-based multinational corporation, multinational digital communications technology conglomerate (company), conglomerate corporation headquartered in San Jose, California. Cisco develo ...
,
Eli Lilly
Eli Lilly (July 8, 1838 – June 6, 1898) was an American soldier, pharmacist, chemist, and businessman who founded the Eli Lilly and Company pharmaceutical corporation. Lilly enlisted in the Union Army during the American Civil War and r ...
,
Computer Associates
CA Technologies, formerly known as CA, Inc. and Computer Associates International, Inc., is an American multinational corporation headquartered in New York City. It is primarily known for its business-to-business (B2B) software with a product po ...
and
Pepsi Cola
Pepsi is a carbonated soft drink manufactured by PepsiCo. Originally created and developed in 1893 by Caleb Bradham and introduced as Brad's Drink, it was renamed as Pepsi-Cola in 1898, and then shortened to Pepsi in 1961.
History
Pepsi was ...
. Mexico has also many enterprises run by ethnic Lebanese, such as
Carlos Slim
Carlos Slim Helú (; born 28 January 1940) is a Mexican business magnate, investor, and philanthropist. From 2010 to 2013, Slim was ranked as the richest person in the world by the ''Forbes'' business magazine. He derived his fortune from hi ...
's
Telmex
Telmex is a Mexican telecommunications company headquartered in Mexico City that provides telecommunications products and services in Mexico. Telmex is still the dominant fixed-line phone carrier in Mexico. In addition to traditional fixed-line ...
.
Solidere shares are the most actively traded in the Beirut Stock Exchange. Its share price in the
Beirut Stock Exchange
The Beirut Stock Exchange (BSE, Arabic: بورصة بيروت) is the principal and only stock exchange of Lebanon. Located in Beirut, it is a public institution run by a committee including a Chairman, a Vice-Chairman and eight members appointed ...
has risen sharply in the last year from around US$5.00 in early 2004 to close at US$17.50 on Friday, 23 December 2005.
Salaries of Lebanese
On 15 October 2011, after various unions, including the teacher's union, the general worker's union and others threatened to strike, the minimum wage was raised by 40% (£L200,000 - $133) to £L700,000 ($466). Most unions went ahead with the strike except the general worker's union.
* Wages between minimal wage and £L1,200,000 ($800) were increased by £L200,000 ($133) to become £L700,000 (minimal wage) and £L1,400,000 ($933) respectively.
* Wages more than £L1,200,000 up to £L1,700,000 ($1,133) were increased by £L300,000 ($200) to become £L1,500,000 ($1,000) and £L2,000,000 ($1,333).
* Wages above £L1,800,000 ($1,200) were not increased.
The increase in wages was welcomed by most Lebanese but it also sparked criticism by some worker's unions, saying that the increases were not up to expectations, especially that employees earning more that $1200 were not entitled to raises. Others criticized the raises altogether citing that it would burden small business that might end up closing altogether; those critics were mainly opposition politicians.
As of 2013
World Bank
The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Interna ...
analysis of
Quality Life Index, it was estimated that:
* 15% of the Lebanese people lives below the poverty line ($2,500)
* 54% of the Lebanese people lives in the moderate middle class ($9,000) annually. 12% from 1998
* 32% of the Lebanese people lives in the upper middle class ($15,000–27,000) annually. 19% from 1998
* 7% of the Lebanese people lives in the highest upper class ($30,000 and above) annually 1% from 1998
Macro-economic trend
The following table shows the main economic indicators in 1986–2020.
Inflation below 5% is in green. The annual unemployment rate is extracted from the
World Bank
The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Interna ...
, although the
International Monetary Fund
The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution, headquartered in Washington, D.C., consisting of 190 countries. Its stated mission is "working to foster globa ...
find them unreliable.
See also
*
Agriculture in Lebanon
Agriculture in Lebanon is the third most productive sector in the country after the tertiary and industrial sectors. It contributes 5 percent of GDP and 8 percent of the effective labor force. The sector includes a large informal Syrian labor and ...
*
Beirut Stock Exchange
The Beirut Stock Exchange (BSE, Arabic: بورصة بيروت) is the principal and only stock exchange of Lebanon. Located in Beirut, it is a public institution run by a committee including a Chairman, a Vice-Chairman and eight members appointed ...
*
Banque de Syrie et du Liban
The Bank of Syria and Lebanon, from 1919 to 1924 ''Banque de Syrie'', from 1924 to 1939 ''Banque de Syrie et du Grand-Liban'', then ''Banque de Syrie et du Liban'' (BSL) from 1939 to 1963, was a French bank that was carved out from the Imperial O ...
*
Banque du Liban
Banque du Liban (BdL, ar, مصرف لبنان, English: Bank of Lebanon) is the central bank of Lebanon. It was established on August 1, 1963, and became fully operational on April 1, 1964. It is currently headed by Riad Salameh.
One of the ma ...
(Central Bank)
*
Lebanese pound
The pound or lira ( ar, ليرة لبنانية ''līra Libnāniyya''; French: ''livre libanaise''; abbreviation: LL in Latin, in Arabic, historically also £L, ISO code: LBP) is the currency of Lebanon. It was formerly divided into 100 piast ...
*
Solidere
Solidere s.a.l. is a Lebanese joint-stock company in charge of planning and redeveloping Beirut Central District following the conclusion, in 1990, of the Lebanese Civil War. By agreement with the government, Solidere has special powers of emin ...
*
Tourism in Lebanon
The tourism industry in Lebanon has been important to the local economy historically and to this day comprises a major source of revenue for the country. Before the Lebanese Civil War, Beirut was widely regarded as "''The Paris of the Middle Ea ...
*
List of banks in Lebanon
This is a list of banks in Lebanon.
List of banks
Central bank
* Banque du Liban (BDL)
List of Banks
Lebanese based banks sorted by their significant presence domestically and overseas:
* Bank Audi
* Byblos Bank
* Bank of Beirut
* Bank of B ...
References
External links
BSE trade sky high despite tensions – ''The Daily Star''*
ttps://www.icalculator.info/lebanon/income-tax-rates.html Lebanon Tax Rates - iCalculator*
* Tariffs applied by Lebanon as provided by ITC'
Market Access Map an online database of customs tariffs and market requirements.
{{Lebanon topics
Economy of the Arab League
bn:লেবানন#অর্থনীতি