A street in Beirut, near the National Museum. (Credit: Philippe Hage Boutros/L'Orient-Le Jour)
The Policy Initiative (Siyasat al-Ghad), a Lebanese civil society think tank, published on its website an estimate of the losses and other potential future costs suffered by Lebanon as a result of the war spillover into south Lebanon.
Its extrapolations, taken from a more detailed report, are based on a range of data, including information published by the Banque du Liban (BDL), the International Monetary Fund (IMF) and the Office for the Coordination of Humanitarian Affairs (OCHA). The report will be released in the coming weeks, the NGO told L’Orient-Le Jour.
Hezbollah and the Israeli army have been exchanging fire, bombardments and drone attacks since Oct. 8, 2023, the day after the start of the Israel-Hamas war.
“According to the Beirut Urban Lab, Israel has carried out more than 2,600 strikes inside Lebanese territory within a 10 km radius of the border, and continues to illegally use phosphorus munitions, causing serious environmental damage and threatening the country's fragile agricultural sector and regional ecosystem,” The Policy Initiative said in its introduction.
It also mentions the number of deaths on the Lebanese side — at least 26 civilians at the time the summary was published — and the number of displaced persons (nearly 90,000). It also points out that the Lebanese economy has already been severely weakened by more than four years of socio-economic crisis, which the authorities allowed to develop and contribute to a drop in GDP from more than $50 billion in 2019 to less than $20 billion today.
Tourism and investment, the first to be affected
The Lebanese NGO anticipated an initial loss of earnings of $450 million due to a 23 percent drop in the number of visitors expected in Lebanon between Oct. 23, 2023 and the end of Feb. 2024.
Around Oct. 23, the national airline Middle East Airlines (MEA) reduced its flight offer in parallel with current events. It has still not restored its schedule to pre-war levels, and is content to add exceptional flights during the festive season.
The Policy Initiative reported that the 1.29 million visitors expected over the period in question are likely to fall by 300,000 as a result. The NGO estimated that each visitor spends an average of $1,500 during their stay, based on data from 2022. The vast majority of these visitors are from the Lebanese diaspora.
The Policy Initiative also expected a drop in investment, which could reach $105 million. A figure extrapolated from trends to "the 60 percent decline recorded in Oct. 2023 in year-on-year real estate transactions across the country,” which also marks a "40 percent decline over the 2011-2022 period,” according to BDL data. This trend had pushed down foreign direct investment, causing the shortfall identified by the NGO for the period from the start of the war until February.
If the war continues or escalates
If the war were to end tomorrow, Lebanon would already have lost around 550 million dollars, including in tourism and investments.
The Policy Initiative also provided its forecasts for the eventuality of the war continuing without any significant increase in intensity. In this scenario, the think tank expected the loss of earnings to reach 1.35 billion dollars for tourism revenues and 210 million dollars for investments between October 2023 and September 2024, i.e. a total of around 1.56 billion dollars.
In this case, the NGO estimated that the war has an impact on exports, given that south Lebanon "contributes significantly to the production of olives, tobacco, almonds, wheat, barley, citrus fruits, bananas, milk and olive oil,” all products which normally bring in 94 million dollars a year in the export column, according to the NGO. Taking this parameter into account, the total bill would then exceed 1.6 billion dollars over the reference period taken into account, stressed the think tank.
The NGO provided estimates of losses to the Lebanese economy in the event of "total war.” In this scenario, it estimated losses of up to 7.7 billion dollars over the current year, more than half of which (4 billion dollars) would be due to a drop in the number of visitors of around 90 percent, the same proportion as in the wake of the 2006 war between Israel and Hezbollah.
The overall drop in salaries caused by the departure of international companies operating in Lebanon (around $53 million), the rise in production costs for local manufacturers following the further deterioration of infrastructure (around $2 billion) and the drop in remittances from the diaspora (around $1.5 billion) will complete the picture.
This article was originally published in L'Orient-Le Jour.