Lebanon offers reasons for optimism in the Middle East and so could Syria if it can achieve stability, a senior S&P executive has said.
The new government and economic plan in Beirut puts it on a better economic trajectory, S&P Global Commodity Insights vice president Roger Diwan told The National during the CERAWeek by S&P Gobal conference in Houston.
In Syria, there was a need to push for stability after recent violence, Mr Diwan added.
“We have a government [in Lebanon] … They have plans to try to fix the economy,” Mr Diwan said. “That's better than where we were a few weeks ago.”
Lebanon's parliament elected army chief Joseph Aoun as President in January, which ended a power vacuum that had existed since 2022. Mr Aoun selected Nawaf Salam as Lebanon's Prime Minister and he has vowed for a new era “rooted in justice, security, progress and opportunities”.
However, the country's struggling economy will take time to recover, with the Israel war further exacerbating the challenge.
Lebanon's real gross domestic product contracted by 7.1 per cent last year because of the war, “a significant setback compared to a no-conflict growth estimated at 0.9 per cent”, a recent World Bank report said. The country's GDP has declined nearly 40 per cent since 2019, with the war further compounding the economic crisis.
Reconstruction and recovery will cost about $11 billion, with $3 billion to $5 billion needed to be publicly financed, including $1 billion for the country's infrastructure alone. Private financing is required for about $6 billion to $8 billion of the costs, mostly in the housing, commerce, industry and tourism sectors, the World Bank said earlier this month.
“The conflict further compounds an ongoing prolonged downturn, exacerbated by sovereign default, sharp currency depreciation, a systemic banking crisis, limited capital investment, and deteriorating public services,” the report said.
“The destruction of capital stock and skilled labour migration further erodes Lebanon’s economic potential, posing significant risks to long term growth.”
Staff from the International Monetary Fund were due to visit Lebanon this week to hold talks with authorities on its reconstruction and recovery needs.
Syria can also be a point of optimism “if we have a stabilisation” there, Mr Diwan said. The country has seen recent clashes between pro-government forces and those loyal to the fallen regime of former president Bashar Al Assad.
His sentiments were echoed by panelists during a discussion on 'The Future of the Middle East' at CERAWeek on Wednesday.
“The departure of Assad is a tremendous strategic advantage, if that country can hold together. And that's a very, very big 'if',” said Meghan O'Sullivan from the Harvard University Kennedy School.
The Syrian economy has been devastated by the civil war, with the UN estimating cumulative losses at more than $440 billion in the first eight years of the conflict, which include physical and economic damage.
The country's economy is projected to have contracted by 1.5 per cent last year, extending the 1.2 per cent decline in 2023, a World Bank report said last May. According to official statistics, Syria’s GDP shrank by 54 per cent between 2010 and 2021. The impact of the conflict could be much larger, the World Bank said.
Rebel forces led by the Hayat Tahrir Al Sham group ousted Mr Al Assad and his government last December and its leader Ahmad Al Shara took over as President. The UK and EU removed some of the economic sanctions imposed on the country during the Assad presidency to help Damascus attract investment into the country. The US is yet to lift its sanctions.
The Assad regime's fall is part of a significant weakening of Iran's grip in the region over the last decade, the panel said, after developments in Damascus and Beirut.
“The fact is, this Iran factor is now less of a determinant of outcomes across the broader region,” said Suzanne Maloney, vice president and director of foreign policy at the Brookings Institution. “There's still enormous obstacles to overcome.” The uncertainty surrounding fragile ceasefire deal in the Gaza war was one of those obstacles, she added.
