- 04
- Jan.
- 2024
To attempt to guess the possible prospects for the year 2024, one must proceed with excessive modesty. Already, the data available from last year is scarce. Even international organizations, which invest millions of dollars annually in surveys and studies, seem engulfed in hazy conjectures. They hesitate to predict anything for the following week.
So, in all modesty, I will try to narrate the futuribles (a term coined decades ago to designate "possible futures")—close to what in English would be called a "best guess." This would still be a bit better than the foretellings of fortune teller Leila Abdel-Latif, who, by the way, was not hired by This Is Beirut.
- State Budget and Deficit: Already, the 2024 budget proposal presented by the government is in deficit, which is the norm here. And if the tax cuts decided by the deputies are adopted, we'll have an even greater deficit. Moreover, if civil servants' salaries are increased, which is likely, the deficit in question will increase further. Therefore, the government will have to borrow more, mostly from the Central Bank, the only available source. As Wassim Mansouri refuses to listen, we might be heading straight into a wall. The first one for 2024.
- Public Services: Consequently, due to the lack of money, integrity, competence ... and actual presence, state services will deteriorate even further—if further deterioration is even possible. Only those funded by an external organization—and closely monitored to prevent leaks—will survive. The fact that some services have increased their prices, even beyond reason, will change nothing in the matter.
- Regionalism: This is a softer version of federalism, mainly a trend that will increase due to the absence of the state, with NGOs and private initiatives taking care of providing a minimum level of public services in each region. Consequently, the regional gap will widen as the central state evaporates. It's almost a return to the city-states of Phoenicia.
- Dollar and Dollarization: There's a chance the exchange rate against the dollar will remain stable or even decrease if the political situation improves, simply because more and more workers are earning income in dollars. So there would be no need to exchange Lebanese pounds (LBP), which would remain scarce in the market. Dollarization would intensify, and cash would continue to reign in transactions, with a modest introduction of fresh dollar cards now offered by banks and half a dozen financial operators.
- Inflation: Until now, inflation was calculated in LBP. Inflation should be calculated without dollar dominance, or there should at least be a second index released in dollars. Prices will likely continue to increase in fresh dollars until they reach the real levels of 2019 by 2024. However, there will be some exceptions, such as real estate, due to a market distortion with an abundant supply of old housing and weak demand.
- Poverty: While dollar earners may partially fare better, those earning in LBP will continue to struggle. Poverty will persist, especially with unrest in the South. This is particularly true for two categories. First, civil servants, to whom one can only give one piece of advice: leave the administration as soon as possible if you have an alternative, as your situation won't improve. Then, those who depend on lollar (dollars accessed through informal channels) withdrawals to survive: even if Circular 151 is updated with a rate higher than LBP 15,000, the trend is to limit monthly withdrawals to LBP 24 million, a meager amount. This poverty will be especially harsh in the healthcare sector, given the collapse of state coverage and private insurance beyond reach.
- Banks: Banking activity will remain constrained in the absence of a revamp of the country's financial system, which is unlikely in 2024. Some services will be revived, but it won't compare to the abundance of the past. This burden significantly affects the country's entire economic activity.
- Trade Balance: This balance is a lingering wound, with a colossal deficit expected at around 15 billion dollars. Incompressible needs, such as fuel (especially for generator mafias), basic products and equipment, will persist. Unfortunately, exports will struggle to somewhat offset the deficit because Gulf markets will remain closed, and industrialists still face challenges in boosting their production capacity due to a lack of bank credit. They will merely gain market share on the local scene. As always, expats' money will help compensate for nearly half of the trade deficit.
- Investment: There is still nothing to encourage entrepreneurs to invest in a high-risk country with nonexistent credit, a distorted monetary system and a chaotic environment. Some sub-sectors will stand out, such as restaurants and industries producing everyday consumer goods, where the market is assured, or startups. But this won't stop some bold investors from trying their luck, even without any logic.
- The Wound: Once again, it's political hemorrhaging that will dominate the economy. Hezbollah's war in the South, which could escalate at any moment, the presidential vacancy if it persists or if we end up with an incompetent president, sterile governments and parliaments and the theatrics of actors who seem to be starring in a remake of Game of Thrones all dominate the scene.
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