To help guide the urgently needed global response, the World Bank Group (WBG), in cooperation with the United Nations (UN) and the European Union (EU) conducted a Rapid Damage and Needs Assessment (RDNA), in close partnership with Lebanese ministries, civil society organizations and other key stakeholders. The RDNA lays the groundwork for an agenda for reform, recovery, and reconstruction that inspires hope for a better future for all Lebanese.
According to the RDNA’s preliminary estimates, the explosion caused between US$3.8 and US$4.6 billion in damage to physical stock, while losses including changes in economic flows as a result of the decline in the output of the economic sectors are estimated to be in the range of US$2.9 and US$3.5 billion. The most severely affected sectors are housing, transport and tangible and intangible cultural assets.
Recovery needs for this year and the next are estimated in the range of US$1.8 and US$2.2 billion, with between US$605 and US$760 million needed in the immediate term until December 2020, and between US$1.18 and US$1.46 billion in the short term for the year 2021. The transport sector’s needs are the highest, followed by culture and housing.
The three main economic effects of the explosion are: losses in economic activity caused by the destruction of physical capital; trade disruptions; and losses in fiscal revenues for the Government. Even prior to the explosion, Lebanon was facing compounded crises with pre-explosion projections of 2020 real GDP growth well into the negative double digits. The disaster will not only exacerbate the contraction in economic activity, but also worsen poverty rates, which were already at 45 percent of the population just prior to the explosion.
The RDNA recommends a “Building Back Better” approach through a framework of Reform, Recovery and Reconstruction combining interventions that prioritizes the needs of the people, particularly the poor and most vulnerable, with structural reforms relating to macroeconomic stabilization, governance, private sector operating environment, and ensuring human security. These reforms should prevent corruption and elite capture.
Given Lebanon’s state of insolvency and lack of sufficient foreign exchange reserves, international aid and private investment will be essential for comprehensive recovery and reconstruction. Lebanon’s implementation of a credible reform agenda will be key to accessing international development assistance and to unlock external and private sector sources of financing.