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.



IMF and Arab Monetary Fund Sign MoU to Enhance Cooperation

The MoU was signed by IMF Managing Director Dr. Kristalina Georgieva and AMF Director General Dr. Fahad Alturki - SPA
The MoU was signed by IMF Managing Director Dr. Kristalina Georgieva and AMF Director General Dr. Fahad Alturki - SPA
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IMF and Arab Monetary Fund Sign MoU to Enhance Cooperation

The MoU was signed by IMF Managing Director Dr. Kristalina Georgieva and AMF Director General Dr. Fahad Alturki - SPA
The MoU was signed by IMF Managing Director Dr. Kristalina Georgieva and AMF Director General Dr. Fahad Alturki - SPA

The International Monetary Fund (IMF) and the Arab Monetary Fund (AMF) signed a memorandum of understanding (MoU) on the sidelines of the AlUla Conference on Emerging Market Economies (EME) to enhance cooperation between the two institutions.

The MoU was signed by IMF Managing Director Dr. Kristalina Georgieva and AMF Director General Dr. Fahad Alturki, SPA reported.

The agreement aims to strengthen coordination in economic and financial policy areas, including surveillance and lending activities, data and analytical exchange, capacity building, and the provision of technical assistance, in support of regional financial and economic stability.

Both sides affirmed that the MoU represents an important step toward deepening their strategic partnership and strengthening the regional financial safety net, serving member countries and enhancing their ability to address economic challenges.


Saudi Chambers Federation Announces First Saudi-Kuwaiti Business Council

File photo of the Saudi flag/AAWSAT
File photo of the Saudi flag/AAWSAT
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Saudi Chambers Federation Announces First Saudi-Kuwaiti Business Council

File photo of the Saudi flag/AAWSAT
File photo of the Saudi flag/AAWSAT

The Federation of Saudi Chambers announced the formation of the first joint Saudi-Kuwaiti Business Council for its inaugural term (1447–1451 AH) and the election of Salman bin Hassan Al-Oqayel as its chairman.

Al-Oqayel said the council’s formation marks a pivotal milestone in economic relations between Saudi Arabia and Kuwait, reflecting a practical approach to enabling the business sectors in both countries to capitalize on promising investment opportunities and strengthen bilateral trade and investment partnerships, SPA reported.

He noted that trade between Saudi Arabia and Kuwait reached approximately SAR9.5 billion by the end of November 2025, including SAR8 billion in Saudi exports and SAR1.5 billion in Kuwaiti imports.


Leading Harvard Trade Economist Says Saudi Arabia Holds Key to Success in Fragmented Global Economy

Professor Pol Antràs speaks during a panel discussion at the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat).
Professor Pol Antràs speaks during a panel discussion at the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat).
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Leading Harvard Trade Economist Says Saudi Arabia Holds Key to Success in Fragmented Global Economy

Professor Pol Antràs speaks during a panel discussion at the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat).
Professor Pol Antràs speaks during a panel discussion at the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat).

Harvard University economics professor Pol Antràs said Saudi Arabia represents an exceptional model in the shifting global trade landscape, differing fundamentally from traditional emerging-market frameworks. He also stressed that globalization has not ended but has instead re-formed into what he describes as fragmented integration.

Speaking to Asharq Al-Awsat on the sidelines of the AlUla Conference for Emerging Market Economies, Antràs said Saudi Arabia’s Vision-driven structural reforms position the Kingdom to benefit from the ongoing phase of fragmented integration, adding that the country’s strategic focus on logistics transformation and artificial intelligence constitutes a key engine for sustainable growth that extends beyond the volatility of global crises.

Antràs, the Robert G. Ory Professor of Economics at Harvard University, is one of the leading contemporary theorists of international trade. His research, which reshaped understanding of global value chains, focuses on how firms organize cross-border production and how regulation and technological change influence global trade flows and corporate decision-making.

He said conventional classifications of economies often obscure important structural differences, noting that the term emerging markets groups together countries with widely divergent industrial bases. Economies that depend heavily on manufacturing exports rely critically on market access and trade integration and therefore face stronger competitive pressures from Chinese exports that are increasingly shifting toward alternative markets.

Saudi Arabia, by contrast, exports extensively while facing limited direct competition from China in its primary export commodity, a situation that creates a strategic opportunity. The current environment allows the Kingdom to obtain imports from China at lower cost and access a broader range of goods that previously flowed largely toward the United States market.

Addressing how emerging economies should respond to dumping pressures and rising competition, Antràs said countries should minimize protectionist tendencies and instead position themselves as committed participants in the multilateral trading system, allowing foreign producers to access domestic markets while encouraging domestic firms to expand internationally.

He noted that although Chinese dumping presents concerns for countries with manufacturing sectors that compete directly with Chinese production, the risk is lower for Saudi Arabia because it does not maintain a large manufacturing base that overlaps directly with Chinese exports. Lower-cost imports could benefit Saudi consumers, while targeted policy tools such as credit programs, subsidies, and support for firms seeking to redesign and upgrade business models represent more effective responses than broad protectionist measures.

Globalization has not ended

Antràs said globalization continues but through more complex structures, with trade agreements increasingly negotiated through diverse arrangements rather than relying primarily on multilateral negotiations. Trade deals will continue to be concluded, but they are likely to become more complex, with uncertainty remaining a defining feature of the global trading environment.

Interest rates and artificial intelligence

According to Antràs, high global interest rates, combined with the additional risk premiums faced by emerging markets, are constraining investment, particularly in sectors that require export financing, capital expenditure, and continuous quality upgrading.

However, he noted that elevated interest rates partly reflect expectations of stronger long-term growth driven by artificial intelligence and broader technological transformation.

He also said if those growth expectations materialize, productivity gains could enable small and medium-sized enterprises to forecast demand more accurately and identify previously untapped markets, partially offsetting the negative effects of higher borrowing costs.

Employment concerns and the role of government

The Harvard professor warned that labor markets face a dual challenge stemming from intensified Chinese export competition and accelerating job automation driven by artificial intelligence, developments that could lead to significant disruptions, particularly among younger workers. He said governments must adopt proactive strategies requiring substantial fiscal resources to mitigate near-term labor-market shocks.

According to Antràs, productivity growth remains the central condition for success: if new technologies deliver the anticipated productivity gains, governments will gain the fiscal space needed to compensate affected groups and retrain the workforce, achieving a balance between addressing short-term disruptions and investing in long-term strategic gains.