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World Bank: Iraq crisis weighs on Lebanese economy

File - Trucks are seen parked on the Madfoun highway, Tuesday, April 2, 2013. (The Daily Star/Mahmoud Kheir)

BEIRUT: The Islamic State of Iraq and Greater Syria’s (ISIS) gains in Iraq have led to further economic downturn in Lebanon, resulting from the loss of the country both as a trade partner and a valued route for Lebanese exports to the Gulf, according to the World Bank.

“For Lebanon, Iraq is both a trading partner and a transit route to the Gulf, and the ongoing Iraqi crisis has blocked Lebanese exporters’ access to Gulf markets,” the MENA Quarterly Economic Brief published Thursday said.

The economic impacts of the current Iraqi crisis fall in line with a greater recession sparked by the Arab Spring in 2011, which had already lowered growth rates in Lebanon from an economic prime in 2009-2010 to a slump during 2011-2014.

The report, titled “Predictions, Perceptions and Economic Reality – Challenges of Seven Middle East and North Africa Countries Described in 14 Charts,” blamed regional governments for not implementing needed reforms during the previous growth period, leaving them exposed to high risk during the downturn.

It said that prior to 2011, gross domestic product per capita was growing steadily for a majority of the countries in the region. In 2009-2010, Lebanon registered a 9 percent real GDP growth rate. In 2009, real GDP grew by 1 percent in Lebanon despite the financial crisis taking over, and in 2010 Lebanon and Yemen led regional growth, registering 7 percent increases.

With the start of 2011 Arab Spring, growth projections were revised downward with rates decreasing sharply in 2011. Lebanon, which had been expected to achieve around 6 to 7 percent growth rates from 2011-2013, witnessed a growth reduction, cutting down growth rate forecasts by more than half.

“There is a risk of policy error if, by trusting economic forecasts that paint a positive outlook for their economies, policymakers resist needed reforms,” said Lili Mottaghi, World Bank MENA economist and the author of the brief.

Lebanon’s growth rate fell into negative territory in the first two quarters of 2011, the last two quarters of 2012 and the first two quarters of 2013.

The report did have some positive Lebanon news, highlighting that the country was one of the only states in the region to have an insubstantial discrepancy between male and female unemployment. Comparatively, countries like Egypt registered a more than 40 percent gap in favor of men.

From 2010 through 2012, male unemployment increased by 0.2 percent, reaching a rate of 23.3 percent of men aged 15-24. However, female unemployment actually witnessed a 0.4 percent decrease; accruing a final 21.8 unemployment rate among women aged 15-24.

Looking forward, Lebanon’s real GDP growth is expected to double and reach 1.5 percent in 2014, after tourist arrivals picked up in June due to Gulf countries lifting their travel advisories to Lebanon.

 
A version of this article appeared in the print edition of The Daily Star on August 11, 2014, on page 5.

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