Discusses key economic indicators and trade statistics, which countries are dominant in the market, and other issues that affect trade.
Lebanon’s economy is in crisis. GDP contracted by 20 percent in 2020 after a 6.7 percent contraction in 2019. The World Bank estimates GDP will further contract by 9.5 or more in 2021. The local currency has lost more than 90 percent of its value on secondary exchange markets, and given Lebanon’s reliance on imports, inflation increased 145 percent from December 2019 to December 2020. Since October 2019, Lebanon’s financial sector imposed ad hoc capital controls, preventing most Lebanese from transferring any money overseas or withdrawing dollars from their bank accounts, despite the fact that nearly 80 percent of accounts in Lebanese banks are denominated in dollars. In March 2020, Lebanon defaulted on its nearly $31 billion in dollar-denominated debt, the first such default in Lebanon’s history. In April, the government published an economic plan with a focus on restructuring its financial sector and attracting foreign assistance; the next day Lebanon signed an official request for IMF assistance. As of the end of July 2021, formal negotiations had yet to begin. On August 4, 2020, an explosion at the Port of Beirut killed more than 200 people and displaced 158,000. The spread of COVID-19 and a surge in Delta variant cases has also dampened economic activity. Most analysts assess that Lebanon’s near- and medium-term economic future is bleak, with likely fiscal austerity, increased inflation, continuing capital controls, further devaluation, and a potential loss of value applied to wealthy accountholders to recapitalize the banking sector. According to the World Bank, more than 50 percent of the population was considered poor by the end of 2020. The only way to arrest Lebanon’s economic recession is painful structural economic reforms that simultaneously tackle the country’s fiscal, financial, debt, and currency crises. The World Bank in a June 2021 report estimated that Lebanon’s economic depression is likely to rank in the top 10, possibly top 3, most severe manmade economic crises globally since the 1850s. The IMF estimated 2020 nominal GDP ($18.73 billion) was the lowest in the Middle East, below Libya and Yemen.
Despite its small size, Lebanon has offered unique market opportunities for U.S. firms. U.S. products and services enjoy relatively excellent receptivity. Although the market is price sensitive, when it comes to quality, Lebanese consumers enjoy name brands, exceptional quality, and after-sales support. For these reasons, several U.S. corporations chose to open offices in Beirut. However, recent developments could dampen Lebanon’s potential as a market for U.S. goods and services. Much depends on how Lebanon implements overdue economic and governance reforms. If the country is able to implement necessary reforms, attract foreign capital, stabilize the exchange rate, and recapitalize its financial sector, opportunities remain for U.S. companies.
Lebanese Customs reported that Lebanon’s total imports in 2020 reached $11.3 billion, of which $936 million (8.2 percent) originated in the United States. The United States was Lebanon’s largest supplier of imported goods, followed by Greece, Turkey, China and Italy. According to Lebanese Customs statistics, major U.S. exports to Lebanon were mineral fuel and oil ($258 million), chemical industrial products ($235 million), automotive ($150 million), vegetable products and prepared foodstuffs ($61 million), and beverages and tobacco ($25 million).
The U.S. government has neither a bilateral investment treaty (BIT) with Lebanon, nor an agreement on the avoidance of double taxation. The U.S. government signed a Trade and Investment Framework Agreement (TIFA) with Lebanon in 2006, but the TIFA never came into force. Since 1999, Lebanon has had observer status at the World Trade Organization (WTO) but has yet to accede to the organization. In 2002, Lebanon signed an association agreement with the European Union that entered into force in 2006.