Estimating Goods Exports in 2024: Methodology and Implications

1. X exports in USD million; R exchange rates  in LBP; and YF Foreign Income in USD billion
2. Excluding year 2023

Lebanese customs have yet to publish the goods exports data for 2024, so we will attempt to provide an estimate in this economic digest. For that purpose, we will rely on the operational concept of the elasticity of exports. As it is widely believed that foreign GDP, YF, and exchange rates, R, are the prime determinants of exports, X, we will then work with the exchange rate elasticity of exports, E₁, and the foreign GDP elasticity of exports, E₂, which is defined as the percentage change of X divided by the percentage change of each of YF and R. Or:

E₁ = (∆X/∆R) x (R/X)

E₂ = (∆X/∆YF) x (YF/X)

Before we calculate E₁ and E₂, a look at the above table is quite revealing. Excluding the year 2023, when the war in Gaza started, we see as the average Lebanese exchange rate of the LBP vis a vis the USD depreciated from 1,515 LBP to 30,313 LBP, and as foreign GDP – calculated as the weighted average of the GDP of Lebanon’s exports partners[1] — increased from $2,386 billion to $2,916 billion, goods exports increased from $2,952 million to $3,492 million. This, importantly, indicates that foreign growth and exchange rate depreciations are conducive to higher exports. But by how much?

Luckily, the elasticities introduced above can help us find out. Taking the average for the variables that define E₁ and E₂ as calculated in the above table, we obtain:

E₁ = (135/7,199) x (11,398/3,521) = 0.06

E₂ = (135/133) x (2,566/3,521) = 0.8

Not surprisingly, we see that exports respond more strongly to foreign income changes than to exchange rate changes: 0.06 as opposed to 0.8; more concretely, this means that a 1% change in in the exchange rate changes exports by 0.06%, whereas a 1% change in foreign income changes exports by 0.8%.

Given that, relative to 2023, foreign income increased by 5.8% in 2024 to $3,288 billion, and the exchange rate depreciated by 3.6% to 89,500 LBP, then the corresponding changes in exports will respectively be 4.6% or $144 million and 0.2% or $6 million, adding to a total of $150 million. This would make estimated exports in 2024 equal to (2995 + 150) $3,145 million. But, of course, this estimate is based on ‘other things being equal’, or doesn’t take into account the war effects of the year 2024 and the limited air freight especially late that year. Taking this into account, by extrapolating from the fall in exports between 2022 and 2023, then goods exports should be lower by at least $425 million in 2024, or to stand at most at about $2,720 million

To conclude, since any meaningful restructuring of the Lebanese economy should involve an increase in goods exports, it pays to heed these three implications. First, exchange rate depreciations have a smaller effect on exports than otherwise. That is because exchange rate depreciations increase the price of imports and this feeds into higher costs of export production, thus negating some or most of the competitive edge arising from exchange rate depreciations (by the way: the proposed  Trump tariffs, by increasing the price of imports, would most likely generate similar effects for the US). So, for this competitive edge to be maintained, import dependence will have to be reduced. Second, in economic terms, since both elasticities E₁ and E₂ are less than one, then they are inelastic or, in other words, exports don’t respond strongly enough to their determinants. So any program to vitalize exports should be part of a wider program to make the economy less rigid by improving its fundamentals, both in terms of resources and institutions. Third, export promotion requires free, open, and safe border passageways – sea, air, land, and even digital – so any mindless/needless military adventures that obstruct these passageways will have to be terminated.

[1] The main export partners for the period are: UAE, Turkey, Iraq, Egypt, USA, Switzerland, France, and Syria. The weights are given by the share of exports. Note that KSA is not included because of the restrictions that it imposed on Lebanese exports as a result of Captagone smuggling. When Saudi restrictions are lifted, we expect exports to be larger and less variable.