In a world where economic resilience is more crucial than ever, Lebanon stands as a testament to the enduring spirit of overcoming adversity. This blog post is a reflection and expansion of those insights, exploring how we can collectively work towards a more robust economy.
The Prelude: Reflecting on Lebanon’s Past Economic Successes
Our journey begins with a look back at Lebanon’s economic landscape, particularly around 2007 and 2008. During these years, Lebanon witnessed a remarkable phase of economic growth, thanks in large part to the collaborative efforts of the government, the central bank, and, crucially, the citizens. This era serves as a beacon of hope and a blueprint for what can be achieved through collective action and strategic economic planning.
The Current Scenario: Understanding the Crisis
Fast forward to the present, and the picture is starkly different. Lebanon faces significant economic challenges, marked by a steep decline in GDP growth, particularly post-2018. The data paints a troubling picture: negative growth rates and a plunging gross domestic savings rate. These indicators are more than mere numbers; they are a reflection of a nation grappling with economic instability.
The Interplay of GDP and Savings: A Dual Focus
A key focus of our analysis is the interplay between GDP growth and savings. A thriving economy typically boosts savings, but the reverse is also true: economic downturns lead to decreased savings due to increased expenditures or borrowing. Lebanon’s current situation, characterized by a combined decline in GDP growth and savings, signals a need for urgent, targeted economic interventions.
Tackling the Crisis: Recommendations for Economic Improvement
The core of our discussion revolves around actionable recommendations to improve Lebanon’s economy. Drawing from past successes and current challenges, these recommendations include:
Fostering Government and Central Bank Collaboration: Just as in the past, strong cooperation between these entities is vital for implementing effective economic policies.
Empowering Citizens: Encouraging entrepreneurship, supporting local businesses, and fostering a culture of economic literacy can help citizens contribute more effectively to the nation’s economy.
Strategic Economic Planning: This involves revisiting fiscal policies, exploring new avenues for economic diversification, and investing in sectors that can drive sustainable growth.
Conclusion: A Call to Action
As we stand at this critical juncture in Lebanon’s economic history, it’s imperative that we learn from our past, understand our present, and actively work towards a better future. The journey ahead is fraught with challenges, but also filled with opportunities for growth and resilience. It’s a journey that requires the collective effort of every Lebanese citizen, policy-maker, and stakeholder. Together, we can steer Lebanon towards a path of economic recovery and prosperity.
In the dynamic world of economics, trade balances play a pivotal role in determining a country’s financial health. This visualization offers a clear and concise representation of Lebanon’s trade situation over the recent years, focusing on the comparison between the exports and imports of goods and services as a percentage of GDP.
Context:
Lebanon, a country with a rich trading history, has faced various economic challenges exacerbated by political instability and global market fluctuations. Understanding the trade trends is crucial for policy-makers, businesses, and academicians to assess the country’s economic resilience and to strategize for future growth.
These pie charts are a visual summary of the economic challenges faced by Lebanon in terms of trade. They underscore the need for strategic planning and diversified economic reform to build a more balanced and self-sufficient economic structure.
In 2019, the pie chart illustrates that imports considerably outweighed exports, indicating a trade deficit. This imbalance suggests that the country was consuming more than it was producing for external markets.
2020 shows a slight shift with the reduction in imports and a marginal increase in exports. This change could be indicative of various factors, such as a change in economic policy, a response to external economic pressures, or the impact of the global events of that year, like the COVID-19 pandemic.
By 2021, the gap between imports and exports continues to persist, although there’s a noticeable improvement in the trade balance, with exports comprising a larger section of the pie.
Problem:
Lebanon is grappling with a trade deficit.
Solutions:
1- Diversification of Exports: Investing in diverse sectors to increase the range of goods and services for export.
2- Improving Domestic Production: Enhancing the quality and quantity of domestic production to reduce reliance on imports.
3- Trade Agreements: Entering into new trade agreements that favor Lebanese exports or revising existing ones to improve trade terms.
After working on these strategies developing these ideas, and through careful analysis and responsive policymaking, Lebanon can work towards a future where its exports and imports are in a healthier balance.
Lebanon’s economy witnessed a significant downturn starting in 2018, with its GDP plummeting from $54.9 billion in 2018 to $23.1 billion in 2021. This sharp decline underscored the urgent need for innovative and sustainable solutions to rejuvenate the nation’s economic framework.
The Crisis in Numbers
The financial crisis in Lebanon manifested in various alarming indicators. The country’s GDP annual growth rate took a nosedive from -1.88% in 2018 to a staggering -21.89% in 2020. This drastic reduction pointed towards a severe contraction in economic activities, investments, and consumption. Further exacerbating the situation was the soaring inflation rate, which reached 154.8% in 2020, eroding the purchasing power of the Lebanese people, destabilizing savings, and deepening economic hardships.
Agriculture: A Beacon of Hope
In the midst of this crisis, a potential solution emerged: leveraging Lebanon’s arable land, which constitutes 13.64% of the country’s total land area. Despite a slight increase in arable land over the past decade, the contribution of agriculture to Lebanon’s GDP witnessed a decline in 2020, signaling an underutilization of this vital resource.
Revitalizing Through Agricultural Enhancement
The proposed solution focuses on enhancing agricultural production. This can be achieved by diversifying crop production, adopting modern agricultural practices, and providing robust support to local farmers. Historically, the agricultural sector has received limited attention from credit bank managers due to perceived risks. Therefore, government incentives and subsidies could play a crucial role in encouraging agricultural growth and exports, thereby aiding in job creation and indirectly boosting the country’s GDP.
Sustainable Practices and Unique Opportunities
Lebanon’s diverse geography and microclimates offer a unique advantage for cultivating a variety of crops. The country’s rich agricultural heritage, featuring culturally significant crop varieties, coupled with sustainable farming practices, enhances the quality and marketability of its produce. The export potential of these unique crops holds promise for stimulating economic growth and fostering regional trade cooperation.
Concrete Steps Forward
Findings suggest that Lebanon’s agricultural sector harbors substantial growth potential, which remains largely untapped. Key recommendations include comprehensive agricultural policy reforms, investment in infrastructure, and promotion of sustainable practices. A collaborative approach involving the government, private sector, and international organizations is essential to effectively implement these recommendations.
Conclusion: A Vision for Recovery
Lebanon stands at a critical juncture where investing in agricultural production and harnessing the potential of its arable land can serve as a cornerstone for economic recovery. This strategy not only aims to enhance the country’s food exports and optimize resource use but also addresses the pressing issues of unemployment and GDP growth.
In essence, Lebanon’s journey towards economic resilience can be significantly bolstered by a strategic pivot to agriculture, tapping into the nation’s inherent strengths and fostering a sustainable and prosperous future.
A world where economic diversification is often seen as the path to financial stability, Lebanon stands out as a nation that has primarily relied on non-agricultural sectors for its economic sustenance. Despite its rich agricultural potential, the country has chosen to prioritize other industries. As Lebanon grapples with a severe economic crisis, it’s crucial to examine the consequences of this strategy and consider whether a renewed focus on agriculture could offer a more resilient path forward.
The main problem Lebanon is currently facing!
Lebanon is currently not placing sufficient emphasis on the agriculture and aquaculture sectors as potential revenue sources.
This neglect comes at a time of economic hardship, marked by a consistent decline in GDP over the years.
Problem Evidence:
Despite the presence of fertile land for agriculture and planting, there is a notable absence of qualified and active employees in this sector, as evidenced by the consistent decline in the percentage of the workforce engaged in agriculture over the years. (the percentage decreases from 5.3%in 2000 to 3.8% in 2021 low percentage of the total employment)
the contributions of forestry and aquaculture to the GDP have been on a continuous decline. (The percentage decreased from 6.3% in 2000 to 1.4% in 2021, indicating a relatively low contribution)
Lebanon’s GDP growth has been consistently decreasing over the years, reaching a troubling -7% in 2021.
Potential solutions
Placing greater emphasis on the agriculture and aquaculture sectors by providing support to local farmers and expanding cultivation areas to meet domestic demands while also generating surplus for export.
Additionally, increasing the number of professionals in this field can be achieved by encouraging universities to prioritize agriculture-related majors and motivating students to pursue studies in this area.
This will result in:
Increased revenue generation and improvements in Lebanon’s GDP after expanding cultivation areas and supporting the agriculture and aquaculture sectors.
Real life success story:
In the summer of 2023, two Lebanese citizens seized the opportunity to cultivate a green, organic farm in the fertile lands of southern Lebanon. Taking advantage of the region’s fertile soil, expansive agricultural land, and favorable weather conditions, they cultivated a variety of fruits and vegetables.
With an initial investment of $1,500, they managed to yield a net profit of $5,000 in just four months. This success story highlights the untapped potential of agriculture and organic farming in Lebanon.
The successful cultivation they were able to get!!!
This solution is validated by the real case example presented at the beginning:
Based on the real-life example, if Lebanon gave more importance to the agriculture sector, this would lead to an increase in domestic production. This, in turn, could serve as a partial solution to the economic and financial crisis the country is facing. Moreover, it would also create more employment opportunities for Lebanese citizens, thereby contributing to a more sustainable and diversified economy. Emphasizing the agriculture sector can play a vital role in bolstering the nation’s economic stability and reducing its reliance on other sectors.
finally, emphasizing agriculture in Lebanon as a means of economic revitalization directly supports SDG 8’s objectives by creating decent work, fostering sustainable economic growth, promoting economic diversification, and facilitating skills development in the agricultural sector.
Contributors:
Lara Baltaji, Hadi Knaiber, Batoul Ramadan, Abdallah Yahfoufi, Nour Azakir, Herbert Pritzki, Shadi Youssef
Background about the Lebanese Crisis:
For nearly three years now, Lebanon has been facing the most devastating financial crisis in the modern era. The crisis started in October 2019 and aggravated by the economic effects of the COVID-19 pandemic and by the massive Port explosion on August 4, 2020. As a result, the black market dollar exchange of the Lebanese Lira increased from 1515 L.L. (before the crisis) to around 40,000 L.L(today) marking an almost 2500% increase.
You can find below a visual that shows the change of the official LBP/Dollar exchange rate over time until this November 2022.
This huge increase came with countless economic impacts on inflation, unemployment and poverty. Lebanon’s severe crisis which was blamed on the government’s corruption and failure has led to massive impacts on the Lebanese currency causing extreme poverty, unemployment, medicine shortage, electricity shortage, fuel shortage, malnutrition and much more. You can find below a visual that shows the change of the Food Inflation and the Food Consumer Price Index with the LBP/Dollar Exchange Rate over time until this March 2022.
The huge inflation was directly reflected on the prices of basic food commodities in Lebanon ever since the start of the economic crisis in 2019. What is meant by basic food commodities is the minimum raw agricultural or animal products sufficient to satisfy the nutrition needs of an average household which comprise of:
Cereals and Tubers (rice, wheat, corn, starch)
Meat, Fish, Eggs and Seafood
Dairy (milk, cheese, labne)
Oil and Fats
Vegetables and Fruits
Sugar and Salt
The slope of increase before 2021, however, was quite subtle due to the fact that food commodities were subsidised by the government back then. As the Central Bank started to run out of resources to keep the subsidies, the government lifted them in March 2021. That is when the increase in prices of basic food commodities started to follow a much steeper slope. The below interactive visual shows the change in average prices of food commodities in Lebanon over the years.
Problem:
According to the World Bank, food price fluctuations between Lebanese markets are caused by the Lebanese government’s “deliberately inadequate policy responses”. Due to the inadequate policy responses by the Lebanese government and due to the fact that Lebanon follows a free market economy, the problem of increased food prices started to worsen as not only are prices increasing, but now they are further inconsistent between markets in the different Lebanese regions . This adds an additional overwhelming problem to the many hardships Lebanese people are facing today.
In order to provide evidence for this issue, we decided to visit two supermarkets in Beirut and observe the differences in food prices. The variation in prices of the same food products was absolutely surprising. The below figure shows the price receipts of the two supermarkets.
Our next step was to explore two datasets issued by World Bank and World Food Programme Price Database. Our data explorations go hand in hand with our observed hypothesis which reveals that “there exist extreme and unexplained variations in food prices around markets in different Lebanese regions”.
The variation in prices of different food commodities has been an existing situation for many years now in Lebanon. This situation has exacerbated ever since the beginning of the economic crisis in 2019 as the price control responses have become inadequate. The following dashboard shows a comparison of prices of the different food categories between the different Lebanese districts over the years until 2021
The following bar graph shows a comparison of prices of specific food products between the different Lebanese districts over the years until 2022
Below we present the percentage difference of some food products between different Lebanese districts in 2022 (until October):
The average price of a one kilogram bag of wheat flour in Mount Lebanon was 28,000 LBP whereas in Baabak-El Hermel 10,000 LBP, recording a 95% difference.
The average price of a 160 gram Akkawi cheese in the South was 60,000 LBP whereas in Akkar 40,000 LBP, recording a 40% difference for cheese.
The average price of a can of powdered milk (2.5 kg) in Mount Lebanon was 325,000 LBP whereas in Akkar 210,000 LBP, recording a 40% difference for milk.
The average price of a 3.6 Litre gallon of olive oil in the South was 500,000 LBP whereas in El Nabatieh 430,000 LBP, recording a 15% difference for oil.
And the list of unexplained price variations between districts just keeps growing and growing.
Finally, in order to further prove our hypothesis, we conducted interviews with random Lebanese residents walking on Beirut’s seaside. When asked whether they were noticing price variations between supermarkets, most interviewees agreed that there exist obvious price variations of basic food commodities between different supermarkets. They added that this variation is not related to the location of the markets, for in many cases they have noticed that even markets lying walking steps away from one another vary in food prices. This means that the price variations cannot be explained by the products’ cost of transportation. It is only explained by the fact that there exists no governmental supervision.
Proposed Solution:
In Lebanon, there are laws that protect consumers from monopoly and from overpricing. However, as with many other laws, the government is unable to strongly implement these laws and monitor the prices of the supermarkets especially in the areas that are far from Beirut. For that, we propose a website, which can later be developed into a mobile application. The website shows the official prices of basic food products in the Lebanese market which are regularly updated by the Ministry of Economy whenever a significant change in the LBP exchange rate occurs. It also displays the prices of these same products in different Lebanese supermarkets. This way, Lebanese consumers will be able to check the prices of products before they go shopping, and thus can tell which supermarkets are following the official prices specified by the ministry and which supermarkets are overpriced.
We are working on involving Lebanese consumers in our website. As we all know, the Ministry of Economy has a limited number of employees. Thus they will not be able to monitor the prices in all the Lebanese shops. A better way for monitoring prices in different supermarkets would be to include consumers in the process by giving them the chance to report prices directly on our website. This means that consumers will act as data collectors, and thus can contribute to the success of this project. Now, the ministry will be able to track the overpriced supermarkets and take the necessary measures.
We also hope to develop the website idea into a mobile application, which is a proposition heavily backed by the Ministry of Economy.
Solution Validation:
The application concept we came up with to tackle the problem needed to be validated in order to be put into action. We needed means to check if our ideology could in fact lead to a change in the real world or it is only a theory on a piece of paper.
Therefore, we decided to take the view points of two parties:
The Lebanese citizens which are the potential future users of our application in order to check if they are actually willing to use it and if it could lead to a change in their lives and to the country in general
The General Director of the Lebanese Ministry of Economy and Trade, Dr. Mohamad Abou Haidar to assess the practicality and the feasibility of the concept by a professional in the field.
In the streets of Beirut, we went down asking random people about the issue and the proposed solution. All in all, people supported the idea and many claimed that they would be using the application without any doubt and believed that it would make a positive change in the pricing system in Lebanon.
On 25 November 2022, our team visited the director general of the Lebanese Ministry of Economy and Trade, Dr. Mohamad Abou Haidar. We interviewed Dr. Abou Haidar about how practical it is to do such an application and how much it could lead to change and the interview was recorded. Dr. Abou Haidar claimed that this application would lead to a significant change in several aspects. First, this application will help fight corruption in terms of pricings because it will be directly synced to the ministry, so any abnormal pricings will be directly reported to the ministry and the issue will be transferred to the responsible authorities that are able to take any legal action. The ministry also is trying to work on implementing online services that protect consumers’ rights along with the UNDP and other organizations. So, this application will be aligned with the goal of the ministry, since it is online-based. In addition to that, it will play a role in controlling the pricings in the market since it substitutes the need for the huge number of employees and the human resources needed that, no matter how many, cannot roam around the entire supermarkets and stores in all the Lebanese regions. He also said that the complaints of the people will reach the ministry in a more efficient and effective way, because they are via the application and therefore, the ministry can know about the concerns and the issues in a much faster way. Finally, Dr. Mohamad summarized the idea by being a “win-win situation” for both the ministry and the consumers. This is because it will fulfil the needs of the consumers by knowing the exact pricings of the items in any supermarket with a press of a button, will ensure that the rights of the consumers are protected, and will lead to the right selection of the place to be visited. It will also help the ministry in terms of protecting consumers’ rights, censorship and supervision.
Conclusion:
The concept website was presented to the General Director of the Lebanese Ministry of Economy and again, the solution was validated and approved by the ministry by providing us the full support in order to create this website as soon as possible in order to help the people followed by the country in general.
Ending with a future perspective, we believe that this problem is crucial to be solved in the very near future because of the damage it is causing in several aspects ranging from economic, financial to social. We, the people and the ministry have bets that our application concept could be a positive game changer in this issue. Solving this problem marks one of the battles against corruption, and is an attempt to make this country perfect, again.
