Moody’s Investors Service, the international rating agency, published on January 16 its year 2024 outlook for the MENA region, where it anticipated that barring some exceptions, countries’ real GDP growth will be supported by a vivid private consumption and a robust investment by the public and private sectors, aided by the implementation of government-backed projects. Accordingly, real GDP growth for the MENA region is expected to average 2.7% in 2024, up from 1.1% in 2023, mainly supported by a strong performance by the non-hydrocarbon sector. The rating agency also projects fiscal balances to register slight deficits or surpluses for most MENA governments, yet projected the high interest rate levels and constrained capital inflows into emerging markets to restrict external financing for countries with weak fundamentals such as Egypt (Caa1 stable), Lebanon (Ca stable) and Tunisia (Caa2 negative). As far as the war is concerned, the rating agency estimates its impact to be limited on MENA economies as long as it remains confined to Gaza, while a propagation scenario of the conflict would have a sizeable negative material impact on all regional economies (specifically Egypt and Lebanon).

As far as Lebanon is concerned, Moody’s anticipated that the high inflation levels, expected at 163% in 2024 compared to an average inflation rate of around 5% in 2018 and 2019, coupled with elevated policy rates (in double digits) and the depreciation of the local currency may cast a negative toll on economic activity. The rating agency also considers that Lebanon’s debt burden will remain unsustainable in the absence of any debt restructuring program, hindering as such access to external financing while domestic funding sources are drying out. Finally, the report indicated that the skirmishes on Lebanon’s southern borders have damaged some civilian infrastructure, and that the longer the conflict lingers the higher the chance of an escalation.