ESCWA: Acute Deterioration of Social Indicators in Lebanon

In a short report on Lebanon’s emerging economic and social situation, ESCWA identified four major factors that have affected the situation quite negatively: political instability, the economic and financial crisis, the COVID-19 epidemic, and the Beirut Port explosion.

In terms of impact assessment, the headcount poverty rate is expected to jump from 28% in 2019 to 55% in May 2020. The corresponding increase in extreme poverty is from 8% to 23%. This brings the total number of the extremely poor and poor among the Lebanese population to 1.1 million and 2.7 million. The latter is an increase of 1.3 million among the poor, whereas the equivalent rise in the number of extremely poor is 750,000.

In addition, the middle-income group has contracted from over 57% of the population in 2019 to less than 40 per cent in May 2020. The real challenge facing Lebanon is that this group, which represents the bulk of the country’s human capital, may shun the uncertain economic opportunities in Lebanon and seek to emigrate.

As important, headcount poverty and vulnerability rates are expected to increase further as a result of rising inflation and the impact of the Beirut Port explosion, particularly affecting incomes and food availability and prices. Few in Lebanon will be spared the negative consequences of these multiple overlapping shocks.

In terms of wealth distribution, Lebanon had one of the most unequal wealth distributions in the region and the world, and one of the highest concentrations of billionaires per capita. The top 10 per cent of adults owned 70.6%, or $151.4 billion, of all estimated personal wealth ($232.2 billion) in the country in 2019. However, these monetary figures are expected to decline in 2020 and the affluent group will shrink significantly from 15% to 5% of the population. Specifically, in 2020, the top decile in Lebanon is projected to hold $90.8 billion of wealth, a 40% drop year-on-year as a result of the banking crisis, the associated restrictions on access to financial wealth, and the expected reduction in the value of high-end land, real-estate property and natural resources, which are represented heavily in the portfolios of the wealthiest nationals. The Beirut Port explosion will further diminish business and individual holdings of real estate and other capital, and their capacity for trading and economic activity.

Lastly, the report identifies four essential policy responses to reverse these highly adverse outcomes. First, establishing a national solidarity fund is a crucial policy response to tackle the country’s humanitarian crisis and close the poverty gap. Second, bolstering food and health security and social protection, which urgently needs donor support. Third, addressing this crisis will require the country to transform quickly and adopt various coping mechanisms. Fourth, enacting necessary economic governance reforms, limiting rent-seeking activities but increasing productive ones, in addition to enhancing transparency and accountability.

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