2024-09-28 16:08:00
Already affected by a crisis lasting several years, the finances of the country of Cedar are on the brink of collapse. The Hamas attack on Israel on October 7, 2023 buried any hope of a rebound.
In the southern suburbs of Beirut, the Gandour factory is on fire. Founded in 1857 by a Beirut pastry chef, the historic biscuit company was hit by Israeli missiles on the night of Friday September 27 to Saturday September 28. On several videos relayed on social networks, we see warehouses going up in smoke. As a symbol, Gandour, one of the last industrial sagas of the country, a company which has resisted crises and wars for almost two centuries, is in turn affected by the conflict between Hezbollah and Israel.
Before the start of the conflict, however, several signs showed a slow recovery of the economy. “Certain indicators (PMI, imports) indeed seem to suggest a slight improvement in activity since the summer of 2022commented the General Directorate of the French Treasury at the beginning of the summer. The year 2023 seemed to follow the same trend, driven by significant remittances and an influx of visitors from the diaspora.”
Tourism revenues estimated by the Bank of Lebanon notably increased by 1.7% last year to reach 5.41 billion dollars (4.84 billion euros). This windfall alone represents nearly a third of Lebanese GDP. But the Hamas attack on Israel on October 7, 2023 buried any hope of a rebound. “The conflict in Gaza has since erased all of the growth gains. concludes the General Directorate of the Treasury. The IMF and the World Bank estimate a contraction in GDP between -0.4 and -0.9% for 2023 (compared to +0.2% before the conflict).
Political immobility and brain drain
The situation is all the more alarming as the Lebanese economy has suffered from political immobility for several years. “The majority of the ruling class is convinced that the Lebanese model has demonstrated its resilience and will be able to hold out until the appearance of new rents, which however appear neither sustainable nor realistic”analyzes the French Treasury in a note published on September 12, 2024.
This paralysis also weighs on aid that could come from outside. In 2022, an agreement between Beirut and the IMF was signed for a $3 billion aid plan, provided that heavy reforms were carried out to get the economy back afloat. Two years later, no aid has been paid by the institution.
Overpriced basic products
In society, the effects of this crisis are significant. In five years, the Lebanese pound has lost more than 98% of its value against the dollar. As a result, record inflation has made basic products unaffordable for part of the population. To try to stop the phenomenon (and to deter war profiteers) the Lebanese Minister of the Economy launched a mobile application to denounce excessive price increases. In vain.
In the country stuck between Israel and Syria, the World Bank estimates the absolute poverty rate (share of the population living on less than $1.90 per day) at 50%. In 2023, the unemployment rate will reach 30%. Among young people, it even exceeded 48%. Without a job and without prospects, new generations are choosing to leave.
According to the statistics firm Information International, the country of Cedar saw 175,500 of its citizens leave in 2023, almost 200% more than the previous year. “For students and young workers, it has become more than an obsession, it is now a question of survival”wrote in 2022 in Le Figaro Samir Ayoub, Franco-Lebanese professor of management sciences and director of the Aix en Provence campus of the ESSCA School of Management. This brain drain further tarnishes the future of Lebanon. Without the workforce to rebuild a ravaged economy and threatened by all-out war, the country’s future looks bleaker than ever.
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