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Lockdown wreaks havoc on Lebanon’s economy

People wear masks as they walk in Beirut Souk, March 17, 2020. (The Daily Star/Mohamad Azakir)

BEIRUT: The coronavirus pandemic has not only rattled Lebanon's residents fear among citizens but has also wreaked havoc on the country's economy, which was already suffering from steep recession, economists and businessmen said.

Nearly 90 percent of companies, businesses, malls, shops, restaurants and movie theaters closed down after the Cabinet declared a countrywide lockdown until March 29.

The latest crisis could not have come at a worse time for the Lebanese, who are already struggling to make ends meet.

There are no official figures on the number of companies that have gone bankrupt or the number of employees who were either laid off or received half a salary.

Some estimates put the number of employees who have been laid off since Oct, 17, 2019, at over 100,000.

The picture now looks even grimmer with the closure of most businesses.

The lockdown means companies will not be able to generate revenues for at least two weeks, putting employees at greater risk of losing their jobs if the coronavirus is not contained in the coming few months.

Pierre Ashkar, the president of the Hotel Owners Association, said the hospitality sector has received a big blow from the outbreak of the virus. “Now I can say that most hotels are officially closed. This is normal when you have a lockdown and a closure of the airport. The good news is that we don’t have to pay electricity and other utility bills. Our staff are staying in their homes and receiving half a salary,” Ashkar told The Daily Star.

He added that most hotels in Beirut had 7 to 8 percent room occupancy before the outbreak of the virus.

“The airport will be closed Wednesday and of course no tourists or visitors from the Arab countries will stay in our hotels. And I really can’t predict the future of the hospitality sector,” Ashkar said.

Nassiib Ghobril, the head of the Economic Research at Byblos Bank, believed that the lockdown would surely have a negative effect on all economic sectors.

“It is too early to quantify the economic impact of the spread of the coronavirus on the Lebanese economy, but it is clear that the impact will compound an already contracting economic activity. The preventive measures that the government has imposed led to the total shutdown of retail, entertainment, restaurants, pubs, sports venues, services, manufacturing, and non-vital businesses in general, in addition to the direct hit that the travel and tourism industry is taking,” Ghobril said.

He added that prior to the government’s measures, some sectors were coping with the economic crisis, but now these sectors are limited to supermarkets, food stores and pharmacies.

“In fact, some supermarkets and food stores have seen their turnover increase despite the increase in prices, as people are stockpiling essential items at home. As such, we tentatively forecast an economic contraction of at least 10 percent for 2020. But it is way too early to put firm figures on economic activity as the outlook is highly uncertain, given that there is no precedent for this, and no rulebook, no blueprint, no clear path forward,” Ghobril said.

On the positive side, according to Ghobril, crude oil prices plummeted below $30 per barrel, and are heading for another four-year low amid expectations of a worsening glut due to the coronavirus and the Saudi-Russia price war.

“In turn, this will alleviate the burden on Banque du Liban’s foreign currency reserves, as it will reduce the import bill for hydrocarbons, which accounts for about one-third of Lebanon’s total import bill. Further, it will reduce Treasury transfers to Eléctricité du Liban, which, in turn, will address a major drain on public expenditures and constitutes a golden opportunity for the government to resolve the electricity problem once and for all through a drastically different plan,” he added.

Ghobril said it had already been a difficult period on businesses of all sizes across the country prior to the new measures.

“But the time for persuasion and public appeals is over, as authorities must do everything they can to safeguard the health of citizens and act in the best interests of the Lebanese people, which requires this urgent action,” he noted.

Rock-Antoine Mehanna, an economist, said coronavirus had a negative impact on the global economy and Lebanon was one of them.

“The virus has already impacted the Lebanese economy, which was already wrecked. The increasing expenditure on medical supplies, products, food and the daily cost of economic activity can also be noted” Mehanna said.

He added that Lebanon was also experiencing hyperinflation even before the outbreak of the virus.

“There is a huge decrease in government revenues even before the lockdown. Now the priority is to contain the pandemic before looking at ways to implement reforms,” Mehanna said.

He added that any reforms now and under the current conditions will have a cost on the lives of people, which will magnify the cost at the wrong time.

But Mehanna underlined the need to tackle corruption and waste in all government agencies.

“This is the best time to combat corruption such as closing the parallel funds and councils such as Council of the South, CDR and Displaced Fund and all the redundant entities like the railway and post office,” he added.

 

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