Lebanon’s economic collapse risks being ranked among the world’s worst financial crises since the mid-19th century, the World Bank said in a damning report released Tuesday.
“The economic and financial crisis is likely to rank among the 10, if not the three most serious crisis episodes globally since the mid-19th century“, says the report.
This year, Lebanon’s economy will contract by almost 10% and there is “no clear turn in sight“, according to the report. Lebanon defaulted on its debt last year, the currency has lost about 85% of its value and poverty is devastating a country once considered a beacon of prosperity in the region.
Entitled “The sinking of Lebanon: Top 3 of the world’s worst crises“, the report says these brutal economic collapses are usually the result of war.
Inappropriate political responses
The collapse of the Lebanese economy over the past 18 months is largely blamed on corruption and mismanagement by the country’s political elite: “The political responses of the Lebanese leaders to these challenges have been woefully insufficient.“, says the report.
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The Lebanese ruling class has failed to respond to the worst emergency the country has seen in a generation, made worse by the coronavirus pandemic and a devastating explosion in the port of Beirut last August.
The International Monetary Fund (IMF) has offered to help, but the country’s political barons have so far been unable to form a government capable of carrying out the reforms to which foreign aid is contingent.
“Subject to extraordinarily high uncertainty, real GDP is expected to contract an additional 9.5% in 2021“, according to the World Bank, destroying any hope of a rapid recovery. According to the monetary institution, the economy contracted by 6.7% in 2019 and 20.3% in 2020.
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More than half of the Lebanese are likely to live below the national poverty line with the majority of the working population paid in Lebanese pounds suffering from the vertiginous drop in purchasing power. Faced with rising unemployment rates, a growing number of households are struggling to access essential services, including health care, the report observes.