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Since the expiration of former President Michel Aoun’s tenure on October 31, 2022, a prolonged absence of a Head of State has persisted, engulfing Lebanon day by day in a growing state of uncertainty and potentially leading to a more severe economic collapse.
Without a president since October 31, 2022, Lebanon is increasingly mired in the economic and financial crisis that initially struck in late 2019. The country is still ruled by a caretaker government with limited powers, the judiciary system is faltering, and the public sector is in total disarray. Investments have effectively halted, and crucial and essential reforms have been indefinitely postponed due to a multitude of factors.
Due to the vacuum at the Head of State and the ongoing political divisions preventing the election of a successor to Michel Aoun, the challenges inherited from his tenure are exacerbated. The administration of public affairs has evolved into a daily struggle with uncertain outcomes, particularly as the authorities persist in restraining the implementation of crucial structural reforms that would enable the country to rebound.
Meanwhile, challenges and difficulties are increasing across all sectors. This comes at a cost, a cost that is certainly challenging to quantify in a single number yet comparatively straightforward to thoroughly analyze and evaluate.
Given its occurrence in the midst of an economic, financial, and monetary crisis, it becomes even more difficult to pin down the precise economic cost of the presidential void. This scenario emerges in the aftermath of the COVID-19 pandemic and the catastrophic explosion at the Port of Beirut, as highlighted by economist Fouad Zmokhol.
A 60% decline in GDP
When discussing economic costs, the primary indicator is GDP. The GDP of Lebanon ranged from 50 to 53 billion dollars before the 2019 crisis. Today, the amount has decreased to 20 billion dollars, indicating a decline of approximately 60%, as elucidated by Fouad Zmokhol.
Zmokhol asserts that the presidential vacancy has unambiguously exacerbated the repercussions of a crisis that was not initially effectively managed during Michel Aoun’s tenure. “This vacuum significantly undermines trust in the country, and when coupled with the absence of reforms, it prevents large-scale investment projects,” the economist said.
Foreign investors are disengaging from Lebanon, causing substantial losses for the country. “Although there are indeed investments being made in the tourism sector, they are insufficient to revitalize the entire economy,” he continued.
Massive losses from 2011 to 2018
Nassib Ghobril, head of the Department of Economic and Financial Studies at Byblos Bank, highlights the missed opportunities Lebanon has undergone due to institutional paralysis, “resulting in a substantial economic burden,” protesting that “this is not the first occurrence!”
He stigmatizes that, from March 2013, following the resignation of Najib Mikati’s government (due to divergence among its constituents regarding preparation for legislative elections, scheduled three months later), until September 2021, when the current government was finally formed, spanning over eight and a half years, successive governments were able to function “normally for only two years and eight months”. This is less than a third of the aforementioned timeframe. “All of this is a consequence of recurrent constitutional paralysis,” he laments. “Between the constant disrespect for constitutional deadlines, the downgrading of Lebanon’s credit rating, and the absence of reforms, the country has squandered tremendous opportunities. All of these factors have now become excessively costly, leaving the economy in shambles,” Ghobril indicates.
Just between 2011 and 2018, the economic cost of various political deadlocks was estimated at 22 billion dollars. “Considering the current crisis in the country, the costs are clearly higher,” he said. “Even if Lebanon were to experience economic growth this year, it would be far from significant, given the contraction in the economy since 2018,” he added.
The economist highlights that under normal circumstances, the country’s GDP “should have risen to 75 billion dollars instead of dropping to 20 billion dollars.”
A prolonged presidential vacancy in Lebanon is not unprecedented; since the declaration of its independence, the country has seen thirteen Presidents, with four taking longer than expected to assume office.
It took more than two years and 46 electoral sessions to elect Michel Aoun as President of the Republic in 2016. His term was marked by an unprecedented economic collapse.
