The United Nation’s Economic and Social Commission for Western Asia (ESCWA) published a report titled “Survey of Economic and Social Developments in the Arab Region 2020-2021” shedding light on the economic and social development across Arab nations during the past couple of years. The report mentioned that the hydrocarbon sector is still the main source of revenue for the Arab region, generating in excess of 50% of revenue for the majority of Arab oil-exporting countries. In this vein, the report commented that the diversification in the export portfolios of oil-exporting countries is decreasing, hence making them more vulnerable to shocks in the global commodity market. In addition, the lack of diversification comes with a sizeable increase in international transport costs and a slow recovery in the hydrocarbon markets and in this vein, it is important to improve on the diversification in the coming period, always according to the ESCWA. Accordingly, the report has come up with two scenarios to assess the region’s macroeconomic outlook: a baseline scenario that assumes an average oil price of $60 per barrel, and an alternate scenario that assumes an average oil price of $80 per barrel, with expectations of an increase in the price to $100 per barrel.

In details, the ESCWA estimated the Arab’s region’s real GDP growth at 3.6% in 2023, down from an estimated 3.7% for the year 2022 and 4.1% in 2021 (in comparison with growth rates of 3.9% in both 2023 and 2022, and a growth of 4.1% in 2021 in the alternate scenario). According to the report, the outlook comes with risks related to slow vaccination rates and fears of a new COVID-19 wave. In this respect, the report stated that the Omicron variant might affect growth rates in the region, and should this variant spread, GDP might grow as a slower pace in 2022 (2.4%) and 2023 (3.2%). Furthermore, inflation is expected to drop from 15.5% in 2021 to 5.7% in 2022 and 3.7% in 2023 under both scenarios. The report also noted that economic recovery, which depends on the status of the pandemic, the speed of vaccine roll-outs, and dependency on oil revenue, among other factors, is different for every Arab sub-region.

More specifically, real GDP growth in GCC countries is expected to reach 3.6% in 2022 (3.9% in the alternate scenario) and 3.6% in 2023 (4.2% in the alternate scenario) mainly spurred by an increase in international oil prices and rising global demand, in addition to quick COVID-19 vaccination roll-outs. On the other hand, the report stated that Arab middle-income countries will profit from an increased demand on their exports, estimating real GDP growth at 2.8% in 2023, in comparison with 4.1% in 2022 and 3.8% in 2021 under both scenarios. In parallel, the report revealed that the Arab region is still burdened by many socioeconomic challenges, citing a slight drop in poverty rate from 26.94% of the Arab population in 2021 to 26.23% in 2023. Furthermore, unemployment rates in the Arab region are among the highest globally, yet are expected to decrease to 10.7% in 2023. Concerning gender gap, the report uncovered that the Arab region has made some improvements in closing said gap, yet is still far from reaching gender parity.

On a local basis, the ESCWA noted that Lebanon is facing one of “its worst socioeconomic crises in its modern history”, with the Lebanese economy contracting by 16.20% in 2021 as the Lebanese Pound has lost more than 8 times its value since October 2019. In addition, the report stated that the country is also suffering from a multitude of exchange rate regimes, namely the official exchange rate of LBP 1,507.5 per USD to settle loans, the rate of LBP 3,900 per USD (increased to LBP 8,000 per USD recently) used by banks, the rate of LBP 12,000 per USD announced by the Central Bank on its platform for imports, and the black market rate of over LBP 22,000 per USD as at mid-July 2021. Furthermore, the ESCWA mentioned the depletion of BDL’s foreign exchange reserves, highlighting the historic rise in inflation rates to around 128% in 2021. It also revealed that Lebanese banks have imposed withdrawal & transfer restrictions on foreign currency deposits, with depositors taking a hit from an “unofficial” haircut on their deposits. From another perspective, the report commented that Lebanon is still suffering from the Beirut port blast, which has caused a host of deaths and injuries, not to mention the significant damage that the city has endured. The report indicated that Lebanon is still battling with twin deficits, high public debt (estimated at circa 308% of GDP in 2021), a loss of business confidence and pressure on the health-care system. From another context, the report noted that with the absence of any sustainable solutions, the Lebanese government has continued to use up the country’s foreign currency reserves held at the Central Bank to finance electricity and subsidies of fuel, food and medical equipment, without in the meanwhile formulating any recovery plan. Finally the report commented that any foreign assistance is conditional upon the current government adopting and implementing a credible reform package supported by the IMF and any other international donors. Should such an event take place, the ESCWA estimated the Lebanese economy to grow by 10.1% in 2022 and by 6.7% in 2023 (10.2% in 2022 and 6.9% in 2023 under the alternate scenario).