Lebanon has been through many tough economic times, but none quite like current times. The novelty in the economic slowdown Lebanon has been witnessing since 2011 is most strikingly its prolonged nature. Structural weaknesses have been left unaddressed and political crises and inaction stretched from one year to the next. Therefore, absent significant growth and reform, the Lebanese economy’s support system, the deposits from the large Lebanese diaspora, remittances (which were even negatively impacted by the slowdown in GCC economies), the Central Bank’s role, has carried the entire load alone and for a long period of almost six years now.
Since 2011, the Lebanese economy has been chained by the vicious cycle of high fiscal deficit, high debt and low growth. Lebanon has been suffering from a chronic fiscal deficit, representing around 10% of GDP and compelling the Lebanese government to pile up debt. In turn, debt represented a growing share of GDP and the debt to GDP ratio has consistently grown from 131% in 2012 to 146% in 2016. In fact, the growth in debt has been outpacing the growth in GDP ever since 2011 as shown in the graph below. This vicious cycle has also negatively impacted Lebanon’s sovereign rating by international rating.
To read more about how Lebanese debt can evolve, click below: