ESCWA: Lebanon's Private Sector - The Bitter Reality of 2020
ESCWA: Lebanon's Formal Private Sector - The Bitter Reality of 2020
Beirut, 2 February 2021--Since 2019, the Lebanese economy is in free fall, a dramatic situation which was further exacerbated by the COVID-19 pandemic and last summer’s Beirut Port explosion. A new policy brief entitled "Lebanon’s Formal Private Sector: the Bitter Reality of 2020", issued by the United Nations Economic and Social Commission for Western Asia (ESCWA), reveals that the country’s formal private sector sales were reduced by some 45% in 2020 compared with 2019, and that 23% of full-time employees in key sectors were laid off.
According to the brief, the Lebanese economy contracted by 20% in 2020 compared with the previous year, following reductions in private sector activity that slashed the gross domestic product (GDP) and tax revenues, which decreased by 17%. Further contraction is expected in 2021 if the COVID-19 vaccine is not rolled out on time, and the necessary political and economic reforms are not implemented.
The pandemic has decreased demand for full-time employment in small and micro enterprises, which hire the majority of poor and vulnerable groups, with women losing out the most. Sectors most affected are construction, hotels and restaurants, and manufacturing.
Against this backdrop, ESCWA Executive Secretary Rola Dashti called for developing a national rescue plan for micro, small and medium enterprises to limit unemployment caused by the pandemic, and for investing in the survival of formal private sector firms through tax deferrals and tax relief. "Concessional loans are needed to meet urgent cashflow requirements in times of emergency in order to avoid mass bankruptcies and more job losses," she added.
In 2020, the majority of formal private sector firms had debt in United States dollars, which exposed them to exchange rate risks, especially non-exporting firms. More than 50% of the debt of these establishments is in dollars, with the figure reaching as high as 80% for those impacted by the Beirut Port blast.
Dashti also urged the Government to roll out protection schemes to reduce the impact of the pandemic on employment. She further highlighted the need to provide incentives to exporting firms in order to boost output and employment growth, and secure inflow of foreign currencies. "Given the current poor fiscal capacity of Lebanon, social and employment programmes require international and regional financing to reduce the odds of increasing the 55% poverty rate in Lebanon,” she affirmed. “International support should be well spent in order for it to target the groups most vulnerable to the current situation,” she concluded.
The new policy brief follows two previous ones on food security and poverty in Lebanon, as part of a series of impact assessments of COVID-19 undertaken by ESCWA to support Arab Governments in joining efforts to mitigate the effects of the pandemic.
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