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Lebanon’s Economy Faces Collapse

Bottom Line: Lebanon’s economy faces collapse, and foreign bidders on potentially lucrative offshore oil and blocks are about to be disappointed as the conflict in Syria feeds a political stalemate in Beirut and rising violence. What happens next in Syria will be crucial for Lebanon.  

Analysis: The past three weeks have seen a rash of attacks in Lebanon—largely in Shi’ite-dominated areas of Beirut and in restive Tripoli—including two explosions outside two mosques on 23 August, which killed over 40 people and wounded hundreds more in Tripoli.  Amid the rising violence directly related to the conflict in Syria and the tension over what will happen next there, we are very concerned about the deteriorating economy.

During the first four months of this year, Lebanon’s budget deficit has risen more than 38%. Total revenues declined 0.76%, including a 4.4% drop in VAT revenues and over a 13% drop in real estate registration fees. Lebanon’s public debt is expected to rise to $65 billion next year, up from $59 billion this year (which is 135% of the country’s GDP).  Furthermore, the Economic Committee is threatening to take a one-day nationwide strike on 4 September much further if a new government is not put in place. The strike includes banks, malls, shops and a variety of private businesses, and is an unprecedented move on the part of Lebanon’s private sector. At this pace, Lebanon will report a contraction…

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