Economy
Lebanon’s economy spirals out of control amid coronavirus, calls for government reform – Global News
Soha Zaiter has never seen the level of need that exists in Lebanon right now.
“We are facing challenges that we never thought of,” said Zaiter, executive manager of the Lebanese Food Bank.
“The people that used to be, let’s say ‘middle class,’ now they don’t exist anymore. Middle class has disappeared because everyone needs help.”
Everyone, that is, apart from the country’s rich and ruling class, who have been the focus of protests since last October.
Back then, Lebanese people were angry about proposed taxes on gasoline, tobacco and even WhatsApp voice calls.
Today, those demands seem almost quaint.
More and more families are now worried about feeding their children and finding basic items like diapers and baby formula.
The Lebanese pound (LBP) is effectively worth about six times less than it was a year ago when compared to the U.S. dollar.
A shortage of U.S. dollars means currency is traded on the black market, so even though the official exchange rate is LBP1,500 to one U.S. dollar, many businesses are currently paying LBP9,000.
It’s devastating for an economy that imports so much of what it consumes.
Flour, fuel and medicines now cost much more, even multiples of what they did last year, leading to hunger and regular power cuts.
The government raised the price of a subsidized loaf of bread by 33 per cent last month, triggering a new wave of protests.
WATCH (Feb. 11, 2020): Lebanon protesters clash with security, demand elections ahead of confidence vote
Prime Minister Hassan Diab has admitted the country risks “a major food crisis.”
In April, the World Bank estimated the economic crisis could put 45 per cent of the population into poverty, a doubling of poverty levels in Lebanon in less than a decade.
In some parts of the country, the figure is estimated to be well above 50 per cent.
A series of other factors will almost certainly make matters even worse.
Perfect storm
The sound of Lebanon’s woes has been largely drowned out as the planet deals with a pandemic.
The country’s crisis was not caused by COVID-19, but the coronavirus that causes it has made a very bad situation even worse, tipping the economy over the edge.
Many businesses that were already struggling to afford imported goods have been forced to close.
On top of that, the country has been unable to agree on a bailout deal with the International Monetary Fund (IMF).
These enormous loans come with strict austerity conditions that Lebanese politicians know they can’t afford to make.
“If they implemented (them), they would be done for politically,” said Sami Hamdi, a Middle East analyst and editor-in-chief of the International Interest.
“That’s what the IMF is proposing, is saving money, is cuts and the like; that will not please the citizens, even if it saves Lebanon from bankruptcy.”
Negotiations with the IMF have broken down, partly because the two sides can’t agree on the size of the bailout needed.
In fact, the Lebanese negotiation team can’t even agree among themselves.
Two members of the team have quit, apparently due to conflicting pressures from various sectarian elements within the Lebanese government.
“We are doing everything possible to thwart the project, and this is what makes us lose our necessary credibility, whether with or without the fund,” Alain Bifani said after he quit as director general of Lebanon’s Finance Ministry in June.
“We claim that we are committed to the plan that saves people’s money, but we give in to narrow interests and we do what will lead to waste people’s rights and money.”
WATCH (Jan. 25, 2020): Protesters doused by water cannons in Lebanon as demonstrations continue
One of the main reforms protesters have been calling for is an overhaul to the diverse country’s unique form of government.
The initial protests forced Saad Hariri to resign as prime minister last year, but the new government hasn’t enacted the types of changes many Lebanese citizens have been calling for.
In Lebanon, the prime minister must be a Sunni Muslim, the president must be a Maronite Christian and the Speaker of parliament must be Shia Muslim.
That compromise helped end the country’s civil war 30 years ago, but critics say a system designed to accentuate religious differences has led to decades of dysfunction and corruption.
Not to mention foreign interference and influence from Iran, Saudi Arabia and the West.
“There is no easy solution to this that does not require turning a blind eye to bolstering elements of Lebanese society that have been part of the problem,” said Hamdi.
“There is no international will at all, from any side, in order to allow the people to manifest their will to overhaul that system. Because that means Lebanon becomes (truly) independent.”
Syria sanctions
If all of that wasn’t enough, the recent imposition of harsh, new U.S sanctions against the Syrian regime of Bashar al-Assad will likely make matters worse again for Lebanon.
The Caesar Act primarily targets Syrian individuals, including the Assad family, military leaders and business executives.
It also places sanctions against supporters of the Assad regime, in particular the Lebanese militant group Hezbollah.
Political allies of Hezbollah formed part of the Lebanese coalition government formed in January 2020.
The porous border between Lebanon and Syria sees a large amount of official and black market trade.
It remains to be seen whether the Caesar Act will have any real effect on the links between Lebanon and the Assads, but it does seem likely to compound problems in Beirut.
Away from the geopolitics, normal Lebanese people have been forced to improvise just to survive, using the entrepreneurial spirit for which they’re known around the world.
Hassan Hasna set up a Facebook group to allow people to barter unwanted goods for food.
“A Lebanese person would say: ‘Yes, the economic situation is tough and the situation is deteriorating, but it doesn’t mean I want to humiliate myself and beg, I am willing to barter a piece of clothes in exchange for bread,’” said Hasna.
“I am proud of such people; they’re doing the impossible to survive and live with dignity.”
However, household items, just like dignity, are in finite supply.
© 2020 Global News, a division of Corus Entertainment Inc.
Economy
U.S. economic growth for last quarter revised up slightly to healthy 3.4% annual rate – The Globe and Mail
The U.S. economy grew at a solid 3.4 per cent annual pace from October through December, the government said Thursday in an upgrade from its previous estimate. The government had previously estimated that the economy expanded at a 3.2 per cent rate last quarter.
The Commerce Department’s revised measure of the nation’s gross domestic product – the total output of goods and services – confirmed that the economy decelerated from its sizzling 4.9 per cent rate of expansion in the July-September quarter.
But last quarter’s growth was still a solid performance, coming in the face of higher interest rates and powered by growing consumer spending, exports and business investment in buildings and software. It marked the sixth straight quarter in which the economy has grown at an annual rate above 2 per cent.
For all of 2023, the U.S. economy – the world’s biggest – grew 2.5 per cent, up from 1.9 per cent in 2022. In the current January-March quarter, the economy is believed to be growing at a slower but still decent 2.1 per cent annual rate, according to a forecasting model issued by the Federal Reserve Bank of Atlanta.
Thursday’s GDP report also suggested that inflation pressures were continuing to ease. The Federal Reserve’s favoured measure of prices – called the personal consumption expenditures price index – rose at a 1.8 per cent annual rate in the fourth quarter. That was down from 2.6 per cent in the third quarter, and it was the smallest rise since 2020, when COVID-19 triggered a recession and sent prices falling.
Stripping out volatile food and energy prices, so-called core inflation amounted to 2 per cent from October through December, unchanged from the third quarter.
The economy’s resilience over the past two years has repeatedly defied predictions that the ever-higher borrowing rates the Fed engineered to fight inflation would lead to waves of layoffs and probably a recession. Beginning in March 2022, the Fed jacked up its benchmark rate 11 times, to a 23-year high, making borrowing much more expensive for businesses and households.
Yet the economy has kept growing, and employers have kept hiring – at a robust average of 251,000 added jobs a month last year and 265,000 a month from December through February.
At the same time, inflation has steadily cooled: After peaking at 9.1 per cent in June 2022, it has dropped to 3.2 per cent, though it remains above the Fed’s 2 per cent target. The combination of sturdy growth and easing inflation has raised hopes that the Fed can manage to achieve a “soft landing” by fully conquering inflation without triggering a recession.
Thursday’s report was the Commerce Department’s third and final estimate of fourth-quarter GDP growth. It will release its first estimate of January-March growth on April 25.
Economy
Canadian economy starts the year on a rebound with 0.6 per cent growth in January – CBC.ca
The Canadian economy grew 0.6 per cent in January, the fastest growth rate in a year, while the economy likely expanded 0.4 per cent in February, Statistics Canada said Thursday.
The rate was higher than forecasted by economists, who were expecting GDP growth of 0.4 per cent in the month. December GDP was revised to a 0.1 per cent contraction from zero growth initially reported.
January’s rise, the fastest since the 0.7 per cent growth in January 2023, was helped by a rebound in educational services as public sector strikes ended in Quebec, Statistics Canada said.
“The more surprising news today was the advance estimate for February,” which suggested that underlying momentum in the economy accelerated further that month, wrote CIBC senior economist Andrew Grantham in a note.
Thursday’s data shows the Canadian economy started 2024 on a strong note after growth stalled in the second half of last year. GDP was flat or negative on a monthly basis in four of the last six months of 2023.
More time for BoC to assess
The strong rebound could allow the Bank of Canada more time to assess whether inflation is slowing sufficiently without risking a severe downturn, though the central bank has said it does not want to stay on hold longer than needed.
Because recent inflation figures have come in below the central bank’s expectations, “it appears that much of the growth we are seeing is coming from an easing of supply constraints rather than necessarily a pick-up in underlying demand,” wrote Grantham.
“As a result, we still see scope for a gradual reduction in interest rates starting in June.”
The central bank has maintained its key policy rate at a 22-year high of five per cent since July, but BoC governors in March agreed that conditions for rate cuts should materialize this year if the economy evolves in line with its projections.
The bank in January forecast a growth rate of 0.5 per cent in the first quarter, and Thursday’s data keeps the economy on a path of small growth in the first three months of 2024. The BoC will release new projections along with its rate announcement on April 10.
Growth in 18 out of 20 sectors
Growth in January was broad-based, with 18 of 20 sectors increasing in the month, StatsCan said. The agency said that real estate and the rental and leasing sectors grew for the third consecutive month, as activity at the offices of real estate agents and brokers drove the gain in January.
Overall, services-producing industries grew 0.7 per cent, while the goods-producing sector expanded 0.2 per cent.
In a preliminary estimate for February, StatsCan said GDP was likely up 0.4 per cent, helped by mining, quarrying, oil and gas extraction, manufacturing and the finance and insurance industries.
Economy
Yellen Sounds Alarm on China ‘Global Domination’ Industrial Push – Bloomberg
US Treasury Secretary Janet Yellen slammed China’s use of subsidies to give its manufacturers in key new industries a competitive advantage, at the cost of distorting the global economy, and said she plans to press China on the issue in an upcoming visit.
“There is no country in the world that subsidizes its preferred, or priority, industries as heavily as China does,” Yellen said in an interview with MSNBC Wednesday — highlighting “massive” aid to electric-car, battery and solar producers. “China’s desire is to really have global domination of these industries.”
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