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Nadine Elali

Bearing the burden

As Lebanese authorities threaten to stop the flow of Syrian refugees into the country, NOW looks at the economic burdens and benefits the displaced people pose to the economy.

Syrian refugees await UNHCR registration in Tripoli. (AFP/Joseph Eid)

Although the conflict in neighboring Syria has without a doubt sent Lebanon’s economy into a tailspin, the growing number of refugees in the country has had more a subtle effect, straining Lebanon’s infrastructure and growth while at the same time stimulating spending activity in poor regions.

 

The IMF’s latest report on Lebanon published in 2014 offered a troubling look at the effect of the Syrian war on Lebanon. The organization said economic growth in Lebanon has decelerated as top industries—real estate, construction and tourism—have all “been affected by increasing uncertainty and deteriorating security.”

 

“We have a complete collapse in exports of goods outside Lebanon,” Makram Malaeb, a program manager at the Social Affairs Ministry told NOW. “We also have almost a complete suspension of real estate activity, and a complete drying up of investment, all of which are leading engines of the growth for GDP.”

 

According to the World Bank, the cost of the Syrian crisis on the Lebanese economy, i.e. the loss of GDP growth rate, amounts to $2.5 billion a year. This is not the cost of the physical presence of the Syrians refugees in Lebanon, but the cost of the political implications and instability the crisis has had on the country.

 

“For the past three years, in addition to the $7.5 billion economic loss, there has been an increase in government spending worth $1.5 billion, and a drop in revenue worth $1.1 billion, so over three years Lebanon has incurred a loss worth of $10 billion USD,” said Malaeb.            

 

Now with a Syrian refugee population set to reach 1.5 million by the end of the year, Lebanon has moved toward stopping the flow of people fleeing its neighbor, citing the economic burdens of hosting such a large population of displaced civilians.

 

Social Affairs Minister Rashid Derbas—who partly handles the portfolio of refugee issues—told reporters Monday that the cabinet would soon finalize a policy to stop new refugees from entering the country. “The issue of stopping the refugees is final, because Lebanon is no longer able to host anymore,” he said.

 

Recourse- poor, debt-ridden, and cash-strapped, Lebanon is hosting the influx of refugees at very high costs. Despite this, the refugees have helped jumpstart some economic activity.

 

Refugees living in Lebanon are consuming and therefore contributing – although at minimal levels – to the country’s national consumption, a main component of the Gross Domestic Product (GDP). The paltry 1 percent GDP growth Lebanon is expected to generate in 2014 is believed to be due to the refugees’ consumption, economic analyst Sami Nader said.

 

“Let’s assume that they are consuming $4 a day, given the number of refugees present, that is almost a total consumption of $2 billion a year,” the analyst told NOW.

 

Jihad Yazigi, editor-in-chief of “The Syria Report”—an online economic digest—told NOW that the importance of the increase in economic activity—whether through spending, consuming or rent—is that it is taking place in relatively poor areas of Lebanon, like the Akkar and Beqaa regions.

 

Moreover, added Yazigi, the refugee presence has decreased production costs partly due to lower labor costs. Syrian refugees are offering to work for cheaper wages in unskilled jobs in rural areas, where an average wage is LBP 20,000 (US$13) per day, while the Syrians charge half that amount.

 

The Syrian refugee presence has also provided an influx of international aid that has been injected into the local economy. “Lebanon has received around $1.7 billion worth of humanitarian aid from 2012 till today through UN agencies which is being spent in the country,” Malaeb told NOW.

 

According to the Social Affairs Ministry program manager, shelter and food are the two sectors most easily identifiable sectors when trying to measure the monetary value associated with the presence of Syrian refugees. Shelter is financed in part by the UNHCR, while food coverage is largely provided by the UN’s World Food Program and spent directly at supermarkets.

 

Despite the swelling refugee population and increased demand on good, the displaced population has had negligible effect on inflation. Malaeb said that Lebanon has so far had the ability to absorb additional demand without inflation on prices of good.

 

However, the positive economic benefits provided by the refugees have been offset by the strain caused by their presence on Lebanon’s infrastructure and labor market.

 

Before the Syrian conflict, Lebanon was already saddled with a creaking infrastructure struggling to provide health services, public education, as well as electricity and water coverage. 

 

The flow of Syrians fleeing into Lebanon has further strained public infrastructure. Economic analyst Sami Nader told NOW that the direct cost of the refugee population on Lebanon’s infrastructure and public services amounts to $1.2 billion.

 

Therefore when measuring in accounting terms the effect of Syrian refugee presence in Lebanon on the economy, figures, Nader said, cancel each other out.

 

The World Bank in November 2013 warned that “government expenditure will be pushed by billions of dollars over the next 15 months to meet surging demand for public services, including health, education, water and electricity.”

 

“It will widen even further a fiscal deficit that already stands at 8.7 percent of Gross Domestic Product (GDP), or US$3.7 billion.”

 

The low wages of Syrian laborers is also expected to also increase poverty and unemployment among the Lebanese. The World Bank estimated that an additional 170,000 Lebanese would be pushed into poverty, joining the existing one million citizens living below the poverty lines, over the next few months.

 

Meanwhile, the IMF said that “the influx of refugees has deeply impacted the labor market, potentially increasing unemployment to about 20 percent.”

 

“Now the competition is between the two most miserable societies,” said Malaeb, “the Syrian refugees and the Lebanese poor.” 

Syrian refugees await UNHCR registration in Tripoli. (AFP/Joseph Eid)

Now the competition is between the two most miserable societies, the Syrian refugees and the Lebanese poor.