| BOP Accounts ($million M) | Q3 2020 | Q3 2021 |
| Current | (1,939) | (2,473.8) |
| of which goods trade | (4,350.3) | (6,322.5) |
| of which remittances | 2,623.3 | 3,208.9 |
| Capital and Financial* | 25.1 | (4,256.4) |
| of which FDI | 2,279.6 | 177.8 |
| of which deposits | (3,647.5) | (3,804.4) |
| BDL Reserves | 11,342.2 | 5,561.4 |
| Errors and Omissions | (9,428.3) | 1,168.8 |
* Excluding BDL reserve assets.
In Bolbol and El Baff (2022)[1], we analyzed Lebanon’s balance of payments (BOP) in 2020. In this economic digest, we complete Part 2 by comparing Q3 2020 with Q3 2021, the latter is the latest data published by BDL. From the above table, we clearly see that year 2020 was pretty bad for Lebanon’s external sector: reserve assets lost $11,342.2 M by Q3 2020 signifying a BOP deficit of the same amount (the BOP is usually opposite in sign to changes in reserve assets). This was driven by a current account deficit of $1,939 M, deposit withdrawals (mostly “non-resident” fiduciary accounts) of $3,647.5 M, and more important errors and omissions of negative $9,428.3 M – most likely as a result of smuggling of subsidized goods and capital flight. Remittances were in net terms $2,623.3 M, but given that gross remittances were $4,650 M, then remittance outflows were $2,027 M.
By Q3 2021 the situation improved somewhat, but the country remained in the red. The BOP was in deficit at $5,561.4 M, this time driven by a larger current account deficit of 2,473.8 M and deposit withdrawals of more or less the same magnitude at $3,804.4 M. However, in Q3 2021, errors and omissions turned positive at $1,168.8 M, as most subsidies were removed by then and most capital flight had already happened; and the positive number perhaps mostly signifies “resistance money” shipped from abroad. Additionally, with gross remittances at $4,950 M and net remittances at $3,208.9 M, then remittance outflows fell to $1741.1 M because of the drop of foreign labor in the country. Lastly, and not surprisingly, FDI fell considerably to $177.8 M, mostly confined to attractive real estate deals.
[1] “Analysis of Lebanon’s Balance of Payments: Q1 2020-Q1 2021 and the Policies in Between (Part 1)”, Blominvest Bank Blog, April 29, 2022.