The United Nations recently released its World Economic Situation Prospects (WESP) 2021 report, which was jointly prepared by the United Nations Department of Economic and Social Affairs (UN/DESA), the United Nations Conference on Trade and Development (UNCTAD), as well as five regional UN commissions spread across Europe (ECE), Africa (ECA), Latin America & the Caribbean (ECLAC), Asia and the Pacific (ESCAP) and Western Asia (ESCWA). The UN commented that the COVID-19 pandemic spread like a “forest fire” worldwide, having a devastating impact on the global economy, which contracted by a sizeable 4.3% in 2020 (down from a growth of 2.5% in 2019), the sharpest drop of its kind since the Great Depression. To put things into perspective, the report pointed out that the global economy had contracted by just 1.7% during the year 2009 economic crisis. The UN/DESA commented that the effect could have been much worse had it not been for some $12.7 billion in global fiscal stimulus packages, with Germany, Japan and the U.S. accounting for c.50% of said packages. The report went further to highlight the pandemic’s shattering effect on jobs, with 2.7 billion (81% of the world’s workforce) being impacted by full or partial lockdown measures, noting in this perspective that the unemployment rate in the OECD (Organization for Economic Cooperation and Development) area reached 8.8% in April 2020. Looking forward, the report projected global economic growth to rise to 4.7% in 2021 and 3.4% in 2022.

On a regional front, the report stated that Western Asia was no different to the global economy, being severely impacted by the crisis, with the tourism and energy (largest driver of the region’s growth and governmental revenues) sectors being hardly hit. In figures, UN estimates revealed that economic growth for the Western Asia region contracted to a negative 4.8% in the year 2020, down from a positive 1.2% in 2019. Nevertheless, GDP growth is forecasted to bounce back to 3.8% in 2021 and 3.4% in 2022. In details, the report anticipates GDP growth for net fuel exporters to rise from an estimated -6.1% in the year 2020 to 3.7% in 2021 and 2.8% in 2022 buoyed by a slight recovery in global energy demand. Also according to the report, most net fuel importers continued to suffer from conflicts and political instability, with GDP growth contracting by 3.4% in 2020 before growing to an anticipated 4.0% in 2021 and 6.0% in 2022.

As far as Lebanon is concerned, the report estimated economic growth at -31.2% in 2020, down from a negative 6.5% in 2019. According to the WESP report, the August 4 port blast piled further misery on the drastic economic situation impacting the country. In this regard, the report pointed out that apart from its tragic human toll, the blast inflicted some 0.4 and 0.6 percentage point (pp) drops in the real GDP for the years 2020 and 2021 on a respective basis, due to the loss in the stock of physical capital, while adding that real GDP may incur an additional 0.4 pp (2020) and 1.3 pp (2021) drop on the back of import constraints. The report, however, commented that the situation opens the door for Lebanon to implement much-needed reforms such as establishing a national solidarity fund to address the country’s humanitarian crisis, suggesting in this perspective the financing of said fund via a progressive income tax given the country’s much lower tax revenues to GDP ratio compared to its peers, improving food & health security & social protection, and applying urgent economic governance reforms. Inflation-wise, the report cited Lebanon’s sizeable double-digit figures of 74.1% and 23.9% for the years 2020 and 2021 on a respective basis, with inflation forecasted to slide to 7.7% in 2022 as depicted by the below tables: