Lebanese economy in dire straits
Nearby Jordan is struggling due to slower economic growth and less foreign investment, according to the IMF. Its debt outlook is healthier than Egypt's, but its unemployment rate is in the double digits, according to financial data provider FactSet.
The size of the Lebanese economy shrank by more than half from 2019 to 2021, according to the World Bank. Lebanon's currency, which since 1997 had been pegged to the U.S. dollar at 1,500 Lebanese pounds to the dollar, now trades around 90,000 pounds to the dollar.
While many businesses have taken to charging in dollars, public employees who still get their wages in lira have seen their purchasing power crash, with many now relying on remittances from relatives abroad to stay afloat. International donors including the United States and Qatar have been subsidising the salaries of Lebanese army soldiers.
The country's leaders reached a tentative agreement with the IMF in April 2022 for a bailout package but they have not implemented most of the reforms required to finalise the deal. The IMF warned in a report earlier this year that without reforms, public debt in the small, crisis-ridden country could reach nearly 550% of GDP.
Before the latest Israel-Hamas war, some officials had pointed to Lebanon's rebounding tourism industry as an economic lifeline. But since the conflict has threatened to envelop Lebanon — with regular small-scale clashes already taking place between militants from Hamas-allied Hezbollah and Israeli forces on the country's southern border — foreign embassies have warned their citizens to leave and airlines have cancelled flights to the country.
Paul Salem, president of the Middle East Institute in Washington, said that “if tensions spread to the Gulf, this conflict will have the potential to severely impact international markets and struggling economies and populations around the globe.”