By Dr. Ali Bolbol, Chief Economist at BLOM Bank and Alexandre Mouradian, Head of Investor Relations at Blominvest Bank
It is often mentioned that Lebanon suffers from a productivity gap or an underutilization of resources or, better still, an output gap[1]. Though this is no doubt true, no estimate of the output gap was ever undertaken. That is what we will try to do in this short note; and we will do it by estimating the potential output for Lebanon and then comparing it with the actual output to measure the resulting output gap. In addition, the discussion concerning the output gap leads to the question of what constitutes the unemployment rate that is consistent with potential output and how we can arrive at it. We will also try to answer this question. So the order of the short note will be as follows: section 2 will estimate potential GDP and the output gap; section 3 will identify the unemployment rate corresponding to potential GDP and how to reach it; and section 4 will conclude.
* Bolbol: Chief Economist, BLOM Bank; Mouradian: Head of Investors Relation, BLOMINVEST Bank. The views expressed by the authors are not necessarily those of the institutions where they work.
[1] See IMF Country Report (Various Years).
For the full study, click below:
Potential GDP and Unemployment in Lebanon