World Bank: Lebanon Crisis Among World's Worst Since 1850s

Anti-government demonstrators block the street with burning garbage dumpsters in front of Lebanon's central bank in this file picture taken on March 16, 2021 - AFP
Anti-government demonstrators block the street with burning garbage dumpsters in front of Lebanon's central bank in this file picture taken on March 16, 2021 - AFP
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World Bank: Lebanon Crisis Among World's Worst Since 1850s

Anti-government demonstrators block the street with burning garbage dumpsters in front of Lebanon's central bank in this file picture taken on March 16, 2021 - AFP
Anti-government demonstrators block the street with burning garbage dumpsters in front of Lebanon's central bank in this file picture taken on March 16, 2021 - AFP

Lebanon's economic collapse is likely to rank among the world's worst financial crises since the mid-19th century, the World Bank said in a damning report released Tuesday.

The report predicts that Lebanon's economy will shrink by close to 10 percent in 2021 and stresses there is "no clear turning point in the horizon".

Lebanon defaulted on its debt last year, the currency lost around 85 percent of its value and poverty is devastating a country once seen as a beacon of prosperity in the region, AFP reported.

"The economic and financial crisis is likely to rank in the top 10, possibly top 3, most severe crisis episodes globally since the mid-nineteenth century," the report said.

The latest World Bank Lebanon Economic Monitor report, entitled "Lebanon Sinking: To the Top 3", said such brutal economic collapses are usually the result of war.

The complete meltdown of Lebanon's economy during the past 18 months is widely blamed on corruption and mismanagement by the country's hereditary political elite.

"Policy responses by Lebanon's leadership to these challenges have been highly inadequate," the report says.

Lebanon's ruling class has failed to act on the country's worst emergency in a generation, which was compounded by the coronavirus pandemic and a devastating explosion at Beirut port last August.

"The increasingly dire socio-economic conditions risk systemic national failings with regional and potentially global effects," the World Bank said.

The International Monetary Fund has offered assistance but the country's political barons have failed to even form a government that could deliver the reforms on which foreign aid is conditioned.

- 'Social unrest' -

"Subject to extraordinarily high uncertainty, real GDP is projected to contract by a further 9.5 percent in 2021," said the World Bank, dashing any hopes of a quick recovery.

According to the monetary institution, the economy contracted by 6.7 percent in 2019 and 20.3 percent in 2020.

The solutions the Lebanese authorities have so far opted for to ease the financial crisis have placed much of the burden on small depositors.

The report warned of "potential triggers to social unrest" in a country with a history of conflict and instability.

"The increasingly dire socio-economic conditions risk systemic national failings with regional and potentially global effects," it said.

The bankrupt state is unable to settle many of its bills and Lebanon's own energy minister, Raymond Ghajar, has warned that electricity supply was becoming critical and that the country could be plunged into total darkness by June's end.

"The sharp deterioration in basic services would have long-term implications: mass migration, loss of learning, poor health outcomes, lack of adequate safety nets, among others," the report said.

"Permanent damage to human capital would be very hard to recover," said the World Bank Lebanon Economic Monitor, whose previous report was entitled "The Deliberate Depression".

"Perhaps this dimension of the Lebanese crisis makes the Lebanon episode unique compared to other global crises," it said.

Some teachers in Lebanon are now earning the equivalent of less than $200 monthly, doctors are increasingly looking for work abroad and many students can no longer afford university tuition.



Trump Taps Scott Bessent for Treasury

(FILES) Scott Bessent, head of Key Square Group and former chief investment officer of Soros Fund Management, attends the second day of the annual Allen & Company Sun Valley Conference, July 12, 2017 in Sun Valley, Idaho.(Photo by Drew ANGERER / GETTY IMAGES NORTH AMERICA / AFP)
(FILES) Scott Bessent, head of Key Square Group and former chief investment officer of Soros Fund Management, attends the second day of the annual Allen & Company Sun Valley Conference, July 12, 2017 in Sun Valley, Idaho.(Photo by Drew ANGERER / GETTY IMAGES NORTH AMERICA / AFP)
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Trump Taps Scott Bessent for Treasury

(FILES) Scott Bessent, head of Key Square Group and former chief investment officer of Soros Fund Management, attends the second day of the annual Allen & Company Sun Valley Conference, July 12, 2017 in Sun Valley, Idaho.(Photo by Drew ANGERER / GETTY IMAGES NORTH AMERICA / AFP)
(FILES) Scott Bessent, head of Key Square Group and former chief investment officer of Soros Fund Management, attends the second day of the annual Allen & Company Sun Valley Conference, July 12, 2017 in Sun Valley, Idaho.(Photo by Drew ANGERER / GETTY IMAGES NORTH AMERICA / AFP)

President-elect Donald Trump on Friday said he will nominate prominent investor Scott Bessent as US Treasury secretary, a key cabinet position with vast influence over economic, regulatory and international affairs.

"I am most pleased to nominate Scott Bessent to serve as the 79th Secretary of the Treasury of the United States," Trump said in a statement released on Truth Social. "Scott is widely respected as one of the world's foremost international investors and geopolitical and economic strategists."

Wall Street has been closely watching who Trump will pick, especially given his plans to remake global trade through tariffs and extend and potentially expand the raft of tax cuts enacted during his first term, Reuters reported
The choice came after days of deliberations by Trump as he sorted through a shifting list of candidates. Bessent spent day after day at Trump's Mar-a-Lago home in Florida providing economic advice, sources said, a proximity to the president-elect that may have helped him prevail.
Other names that had been floated included Apollo Global Management Chief Executive Marc Rowan and former Federal Reserve Governor Kevin Warsh. Investor John Paulson had also been a leading candidate, but dropped out, while Wall Street veteran Howard Lutnick, another contender, was appointed as head of the Commerce Department.
Bessent, who did not immediately respond to a request for comment, has advocated for tax reform and deregulation, particularly to spur more bank lending and energy production, as noted in a recent opinion piece he wrote for The Wall Street Journal.
The market's surge after Trump's election victory, he wrote, signaled investor expectations of "higher growth, lower volatility and inflation, and a revitalized economy for all Americans."
"Bessent has been on the side of less aggressive tariffs," said Oxford Economics' Ryan Sweet, adding that picking him makes the steep tariffs Trump proposed on the campaign trail less likely.
Bessent follows other financial luminaries who have taken the job, including former Goldman Sachs executives Robert Rubin, Hank Paulson and Steven Mnuchin, Trump's first Treasury chief. Janet Yellen, the current secretary and first woman in the job, previously chaired the Federal Reserve and White House Council of Economic Advisers.
Republican US Senator Lindsey Graham from South Carolina, Bessent's home state, said in a statement: "President Trump's economic agenda is in good hands with Scott Bessent. I look forward to working closely with Scott and President Trump to lower inflation and create the golden age of prosperity for the American people."