That Lebanon has remained for more than three years doing practically nothing to remedy its economic crisis – which is one of the worst three economic crises that hit the world economy in the last 150 years – is simply mind boggling, if not tragic. The inaction has meant needless but painful losses of output and income and steep rises in unemployment. The current note will provide some preliminary estimates of these losses and will present a standard methodology to get the economy on an optimal growth path once a structural reform program is applied. We will begin first with estimating potential output (in a slightly technical way), then we will calculate the output gap arising from the crisis, and finish with a brief discussion of the catch-up process to regain lost output. Lastly, we will conclude.
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Lebanese Lost GDP during the Crisis A Counterfactual Analysis