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Lebanon: The EBRD's worst regional performer

The country is the least well-off of the five observed in the institution's latest report.

Lebanon: The EBRD's worst regional performer

A shopping street in Bourj Hammoud at the northern entrance to Beirut, May 12, 2024. (Credit: PHB/L'Orient-Le Jour)

The European Bank for Reconstruction and Development (EBRD, partly owned by the European Union) estimated that Lebanon's GDP could increase by 0.2 percent in 2024, a mid-point between the most optimistic and the most pessimistic projections.

The institution announced in a press release issued on Wednesday on the occasion of the latest edition of its Regional Economic Prospects focusing on the SEMED region (Southern and Eastern Mediterranean, which includes Egypt, Jordan, Lebanon, Morocco and Tunisia).

“GDP is expected to grow by 0.2 percent in 2024, held back by geopolitical risk, political inaction and stalled reforms. Growth could accelerate to 3 percent in 2025, if regional tensions ease, an International Monetary Fund (IMF) program is put in place and progress is made in implementing reforms,” the EBRD estimated.

By way of comparison, the World Bank bet in April that Lebanese GDP would grow by 0.5 percent, while at the end of March, the United Nations Economic and Social Commission for Western Asia (ESCWA) expected a contraction of 0.9 percent over the same period. The IMF has yet to make any projections. The country has been in crisis since 2019, a situation exacerbated by the Gaza conflict, which has spilled over into southern Lebanon since October 2023.

The authors of the report devoted a paragraph to the increase in foreign exchange reserves recorded by the Central Bank over the second half of 2023 (around $750 million more since the arrival of Deputy Governor Wassim Mansouri at the end of July), attributing this rise to “an increase in remittances to Lebanon and tourist spending. These reserves, however, show a decline of around $1 billion over the full year 2023.”

The EBRD also refers to the measures taken by the BDL to “fix the exchange rate at a level closer to that of the black market,” noting that the exchange rate has stabilized at around 89,700 Lebanese pounds to the dollar since the end of August 2023. Lastly, it points out that inflation stabilized in early 2024. In fact, the April consumer price index (CPI) in Lebanese pounds shows a double-digit annual growth rate (+70.36 percent), after more than three years of annual growth in excess of 100 percent.

Tunisian rebound

Last but not least, Lebanon is the worst of the five countries in the SEMED region, with average growth expected to reach 3.4 percent in 2024, up substantially from +2.7 percent in 2023. The EBRD says it has revised its initial average for 2024 downwards “due to the slower-than-expected implementation of major public investment projects in Egypt and the fallout from the war in Gaza.”

“Overall, the region has shown resilience in the face of the war in Gaza and rising regional political and security tensions in recent months, although Jordan has seen a decline in tourism and investment and Tunisia has continued to struggle with financing constraints,” the EBRD further detailed.

It expects Egypt's GDP to grow by 3 percent in 2024, pointing out that “the reduction in Egypt's revenues from Suez Canal traffic has been more than offset by recent commitments from international partners, including an expanded IMF program”.

For Jordan, the institution is forecasting growth of 2.4 percent, impacted by the consequences of the Gaza war on tourism, investment and falling domestic consumption. For Morocco, the EBRD expects stable growth of 3 percent, despite the repercussions of the devastating earthquake that hit the country in September 2023. Finally, the report expects the Tunisian economy to rebound sharply in 2024, with expected growth of 1.9 percent compared with 0.4 percent in 2023, “underpinned by reform efforts and continued fiscal consolidation, while macroeconomic risks have been brought somewhat under control.”

This article originally appeared in French in L'Orient-Le Jour.

The European Bank for Reconstruction and Development (EBRD, partly owned by the European Union) estimated that Lebanon's GDP could increase by 0.2 percent in 2024, a mid-point between the most optimistic and the most pessimistic projections.The institution announced in a press release issued on Wednesday on the occasion of the latest edition of its Regional Economic Prospects focusing on the...