Lebanon's in perfect shape, on paper

Lebanon’s recent economic woes have been well documented
by Georgi Azar

8 November 2018 | 17:13

Source: by Annahar

  • by Georgi Azar
  • Source: Annahar
  • Last update: 8 November 2018 | 17:13

This picture shows a street in Downtown Beirut, which has been hit hard amid the ongoing economic crisis (AFP)

BEIRUT: The World Economic Forum’s latest Global Competitiveness report has inflated Lebanon’s worldwide ranking, painting a rosy picture of a country that is actually slipping as several other reputable agencies have noted in recent reports, leading economist Jihad El Hokayem tells Annahar.

Coming in 80th place out of 140 countries in 2018, Lebanon seemingly managed to exceed all expectations, and against all odds, to jump 25 places in a single year. 

This, however, does not mirror the current reality facing Lebanon, El Hokayem notes.

Lebanon’s recent economic woes have been well documented, with experts continuously sounding alarm bells over the unsustainable path currently being trodden.

The government debt has continued to grow to alarming levels, equaling a staggering 153 percent of Lebanon's gross domestic product, only behind Japan and Greece.

While Moody’s expects the servicing costs on this debt to absorb 44 percent of the government’s revenues this year, Lebanon’s current account deficit will reach nearly 25.8 percent of GDP, according to the International Monetary Fund.

But a stark contrast is presented within the WEF’s report, which upped Lebanon’s macroeconomic stability from the 133rd place to a respectable spot of 114, tied with 31 other countries.

El Hokayem attributes this positive adjustment to a bevy of factors, including a change of criteria, methodology, and misleading data.

“They seemingly decreased the number of criteria used to compound these ratings,” he says, adding that some “of the data is either flat out wrong or inaccurate.”

For instance, while the 2017 edition of the report took into account the country’s credit rating, government debt, inflation, gross national savings, and the government’s budget balance, its 2018 version merely looked at debt dynamics and inflation change year on year.

While the reliance on a lesser number of benchmarks “undoubtedly distorts“ Lebanon’s true macroeconomic actuality, El Hokayem points out also the faulty inflation change recorded by the WEF.

In the latest edition, the organization alludes to an inflation rate of 1.8 percent, although Lebanon actually witnessed a substantive increase of 4.5 percent in 2017 according to Bank Audi’s latest economic and financial report.

"This is, by all means, due to the public sector pay rises funded by a tax hike which was passed by lawmakers in the summer of 2017," he says, with all the categories constituting the Consumer Price Index (CPI) witnessing an increase in their prices driven by these additional taxes. 

Taxes, he says, which came at an inopportune time, as "Lebanon is currently in a recession."

The change of criteria and deflated rate led to “figures that seem erroneous and deceptive,” El Hokayem says.

An ever-increasing unemployment rate amid troublous times also continues to add to Lebanon’s brain drain, as young graduates struggle to find sustainable, decent paying jobs.

Yet the figures applied by the WEF found that Lebanese business owners managed to boost female employment, leading to a considerable leap in women participation in the workforce, which pushed Lebanon up 25 places (from 128 in 2017 to 103 a year later).

“These figures seem unreasonable,” El Hokayem notes, arguing that “employment of both men and women has continued to stagnate if not decrease."

El Hokayem also points out to the unsounded reliance on the reach of Lebanon’s electricity grid, instead of the quality of service, which vaulted the Mediterranean country’s infrastructure rating to first place. 

According to the WEF, Lebanon enjoys a perfect electrification score, despite the country’s lengthy struggles with providing power to its citizens since the conclusion of the civil war some 30 years ago.

Only this week, Lebanese nearly faced increased power cuts after two main plants, in Zouk and Jiyyeh, ran out of fuel, while a number of private generator owners plunged dozens of neighborhoods into darkness after cutting their access. 

Only after last-minute negotiations with Algerian officials and a promise of the delayed payment did their Lebanese counterparts manage to secure the necessary fuel to avoid more power rationing.

On the health front, Lebanon came in 36th place in 2018, after the organization decreased the number of criterion to a single gauge, life expectancy. 

In 2017, Lebanon ranked 32 in life expectancy, with some medical experts attributing the drop to impending health hazards as the country's environment has been consumed owing to the ongoing waste crisis, which has taken its toll on seas, beaches, and freshwater reserves; and subsequently the population's well-being.

However, El Hokayem explains, the WEF failed to take into consideration a plethora of other factors, casting aside elements from years gone by like HIV prevalence, infant mortality and tuberculosis incidences, among others, while undermining progress made by the health sector "in terms of medical services provided by Lebanon's leading hospitals and the effectiveness of care."

"An outsider looking at the WEF report will get a faulty image of Lebanon," El Hokayem says, adding that Lebanese policymakers should implement reforms to reverse the country's current state of affairs.

The economist argued that the World Bank's Ease of Doing business report "more closely resembles the actual outlook of Lebanon," after its latest issue saw Lebanon drop 9 spots, coming in at 142 out of 190 countries. 

"The WEF report is in obvious contradiction with our reality over the past year," El Hokayem concludes, reiterating the unlikeliness of 2016's Cabinet enhancing Lebanon's different facets in a mere 12 months.   

Given the almost seven-months long Cabinet crisis currently engulfing Lebanon, momentum in confidence that the last parliamentary elections generated has been snapped, with Lebanon facing an uphill battle to dig itself out of this hole. 

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