The United Nations recently released its World Economic Situation Prospects (WESP) 2022 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 even after two years since the start of the pandemic, the end is nowhere near, with more than 25% of developing countries still falling short of their pre-pandemic output levels. This is mainly attributed to the limited access to vaccines (23.9 vaccines per 100 people for least developed countries vs 147.4 vaccines per 100 people for developed countries in 2021) and strained financial resources. The report expects global economic growth to 4.0% in 2022 and 3.5% in 2023 compared to higher growth of 5.5% in 2021, the largest growth rate in four decades. Always in this regard, the report revealed that the slowing growth momentum was most prevalent in big economies such as China, the European Union and the United States of America as the effects of the fiscal stimulus packages waned coupled with the emergence of supply-chain disruptions. The report added that mounting inflationary pressures in major developed economies (United States and European Union) and large developing countries (Latin America and the Caribbean) is posing a major risk to global recovery, with global inflation standing at 5.2% in 2021, outpacing its average of the last 10 years by two percentage points.

On a regional front, the report expected recovery to continue in the Western Asia region in 2022 buoyed by a surge in domestic demand yet commented that said recovery will be uneven. In details, the UN commented that while unemployment rates returned to pre-pandemic trends in Saudi Arabia and Turkey, the situation remains “dire” in Iraq, Lebanon, Palestine, Syria and Yemen. In figures, UN estimates revealed that economic output for the Western Asia region grew by 4.7% in the year 2021, in comparison with a 3.4% contraction in 2020. In addition, GDP growth is forecasted to attain 4.8% in 2022 and 3.5% in 2023. In details, the report anticipates GDP growth for net fuel exporters to rise from an estimated 2.5% in the year 2021 to 5.6% in 2022 and 3.8% in 2023 buoyed by a slight recovery in global energy demand. On the other hand, the UN estimated growth for net fuel importers to slow from 7.0% in 2021 to 3.9% in 2022 and 3.3% in 2023.

As far as Lebanon is concerned, the report estimated the Lebanese economy to have contracted by 16.2% in 2021 compared to larger contraction of 37.1% in 2020. According to the WESP report, Lebanon is facing an unparalleled crisis characterized by the prevailing financial crisis, the loss of tourism revenues due to the COVID-19 pandemic and the Beirut port explosion. On the financial crisis front, the report commented that the newly formed government will be soon restarting negotiations with the IMF over debt restructuring and default. In this vein, the United Nations report pointed out that while local currency debt is still being repaid, a default has practically occurred due to the inflationary effects. As far as foreign currency debt is concerned, the report pointed out that Lebanese banks and the Central Bank hold a significant share (more than 50%) of the Eurobonds portfolio, $11 billion and $5 billion respectively out of a total of $31.3 billion. Accordingly, and bearing in mind that Eurobonds constitute some 94% of total foreign currency debt, a sizeable haircut on dollar-denominated deposits is “inevitable” as per the United Nations report. Inflation-wise, the report cited Lebanon’s sizeable triple-digit figures and double-digit figures of 128.0% and 64.9% for the years 2021 and 2022 on a respective basis, with inflation forecasted to slide to 8.5% in 2023 as depicted by the below tables: