The World Bank recently released its Lebanon Economic Monitor (LEM) Fall-2023 report titled “In the Grip of a New Crisis” in which it discussed recent economic developments related to Lebanon. The report pointed out that Lebanon’s economic contraction further decelerated to 0.6% in 2022, its softest dip since the onset of the crisis, and was poised to grow by 0.2% in 2023 (prior to the Gaza war) supported by robust tourism activity and the stabilization of the private sector. The World Bank warned, however, that the aforementioned two drivers are highly susceptible to shocks. In figures, the report uncovered that tourist arrivals increased by 50.6% in 2022, and by 25.2% y-o-y in the first eight months of 2023, supporting consumption spending. On the other hand, the report pointed out that the real estate sector remains dull, with construction permits and cement deliveries dropping by 1.2% and 8.1% in 2022, restrained by the absence of credit for developers and waning demand on the back of the drop in per capita income. The World Bank added that the fiscal and primary deficits are projected to improve from 2.9% and 2.1% of GDP in 2022 to 1.3% and 0.3% in 2023 on a respective basis, as revenue enhancing measures pertaining to adjusting the applicable exchange rate to calculate customs fees and VAT kicked in. Always in the same vein, the World Bank commented that the Central Bank’s decision to abstain from financing the deficit may lead to even lower fiscal and primary deficits. The report unveiled that the debt to GDP ratio worsened to around 180% in 2022, as the contraction in GDP outweighed the drop in the USD counter value of the LBP-portion of debt. The World Bank expects this trend to continue, and has accordingly urged Lebanon to address the public debt issue by engaging in negotiations with its creditors and restructuring its dues. In this vein, the World Bank pointed out that a sample of 180 debt restructurings during the 1987 – 2010 period averaged a haircut of 37%, yet indicated that Lebanon would need a “much larger” haircut to achieve debt sustainability. As far as the external sector is concerned, the World Bank anticipates the current account deficit to contract from 32.7% of GDP in 2022 to 12.8% in 2023, owing to the aforementioned correction in applicable exchange rate for calculating customs fees, with imports of goods and services dropping by 9.4% in the first seven months of 2023. Always in the same vein, the World Bank expects imports to dip by 23.1% annually in 2023, to attain $13.9 billion, nearing the year 2021 level. The report also pointed out that the current account was buoyed by the robust tourism activity Lebanon has been witnessing lately. The World Bank also highlighted that the Central Bank’s foreign currency reserves have improved by $425 million over the period extending between August and Mid-November, as BDL stopped the Sayrafa platform and purchased excess USD liquidity from the market (especially after the flamboyant tourism season), yet warned that this trend may be short-lived. Remittances remain robust, at around $6.4 billion, expected to represent 35.2% of GDP (the highest level since 2019) in 2023, noting that this figure may be underestimated as it only captures remittances via official channels. The report also added that the exchange rate has recently stabilized at around LBP 90,000/USD (a 98.33% depreciation from the previous official exchange rate of LBP 1,507.5 per USD), yet inflationary pressures remain high as the economy has become more dollarized. In figures, the World Bank revealed that Lebanon’s food price inflation stood at 280% over the March to July 2023 period, being the second highest globally. Finally, the World Bank noted that Lebanon remains paralyzed by the plethora of vacuums it is experiencing (presidential, caretaker government, acting Central Bank governor), and that oil & gas drilling is yet to yield any tangible results.