Last Friday, January 4, a long-awaited macro-economic report by the McKinsey consulting firm, was released by the Lebanese government. Originally scheduled to be publicly released after the new cabinet was inaugurated, caretaker Economy Minister Raed Khoury said Monday that delays with government formation, together with Lebanon’s worsening economic situation, had pushed him to publish the report sooner.
The 1274 pages of texts, tables, and graphs are the most comprehensive assessment yet of the state of Lebanon’s economy and its future potential. According to the report, there are enormous prospects for Lebanon. The report itself focuses on improving five key sectors: agriculture, industry, tourism, knowledge economy, and financial services, and presents a vision for 2025 and 2035. It envisions Lebanon becoming the Middle East’s bread basket with niche high-value and creative industries. According to McKinsey, Lebanon is also poised to become the up-and-coming Mediterranean Riviera and potentially the Silicon Valley of the Middle East. Lebanon’s financial sector could even become an “offshore hub targeting mid-high net individuals.”
The McKinsey report also confirms some disconcerting, but well known, facts. In addition to a failing public sector, Lebanon has the third-highest debt-to-GDP ratio in the world. Corruption keeps growing; since 2012, Lebanon has dropped 20 places on the corruption index. At the same time, the gross domestic product (GDP) is up only 30% since 1980, when the country was in the middle of a civil war. Another shocking finding is that Lebanon ranks behind Yemen, Nigeria, and Haiti as the fourth-worst country in the world for “quality of electricity supply.” More surprising is McKinsey’s assessment of the quality of the education sector (“low”) and Lebanon’s relationship with its famous diaspora (remittances formed 14,6 % of the GDP in 2017), which it qualifies as “withering” because there is no “pro-active approach to reinforce the Lebanese identity abroad.”
Since the May 6, 2018 elections – the first parliamentary elections in nearly ten years – Lebanon has been run by a caretaker government. Premier-designate Saad Hariri, assisted by President Michel Aoun and Speaker of the Parliament Nabih Berri, have not been able to overcome bickering over the allocation of ministerial posts; infighting within the Christian parties; positioning over the successor of President Aoun in 2022; disagreements on the role of Hezbollah and independent Sunni MPs; and differences over the (changing) relationship with Syria and the “dissociation policy” of staying out of regional politics, including Lebanon’s relationship vis-à-vis Iran and Saudi Arabia. More than 10 months after the elections, Lebanese are still waiting for a new government to tackle the dire state of the country’s economy.
Hopefully, the damning McKinsey report will spur Lebanon’s political class into action and force them to start governing and serving the Lebanese people, instead of only protecting their own interests.