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publicationNovember 23, 2022

Lebanon Economic Monitor, Fall 2022: Time for an Equitable Banking Resolution

Lebanon Economic Monitor (LEM) Fall 2022

The Fall 2022 issue of the LEM presents the World Bank’s latest macroeconomic projections for 2022, within a prolonged context of uncertainty and institutional vacuum. It highlights the main bottlenecks prohibiting a comprehensive solution, with a particular focus on the discord amongst stakeholders on the distribution of financial losses-owing to the magnitude of losses in the financial sector. 

The economy continues to contract, albeit at a somewhat slower pace. Testament to the continued atrophy of Lebanon’s economy, the Lebanese Pound continues to depreciate sharply and to drive surging inflation, in triple digits since July 2020, impacting the poor and vulnerable the most. Real GDP is projected to contract by a further 5.4 percent in 2022 assuming continued political paralysis and no implementation of a recovery strategy. Inflation is expected to average 186 percent in 2022, amongst the highest globally, partly due to the shrinking share of imports based on BdL subsidized rates. 

An unprecedented institutional vacuum will likely further delay any agreement on crisis resolution and much needed reforms. Divergent views among key stakeholders on how to distribute the financial losses remain the main bottleneck for reaching an agreement on a comprehensive reform agenda.  Such discord prevents banking sector resolution which is critical for restoring financial sector stability and economic recovery.  

The LEM also includes two Special Focus sections: “Global Comparators: The Hole is Greater than the Sum of the Parts” and “Dollarization in Lebanon”.