This chapter critically evaluates the policy measures enacted by Lebanon in response to the economic turmoil following the Syrian refugee influx. The analysis encompasses a spectrum of policy areas, including but not limited to monetary policy, fiscal adjustments, and labour market regulation. It scrutinizes the efficacy of these policies, highlighting both their strengths and potential weaknesses. Moreover, the chapter debates the long-term viability of the Lebanese government's responses, especially in relation to persistent challenges such as employment, price stability, and external trade. Additionally, the chapter provides a discourse on alternative policy strategies, inviting policymakers to consider varied approaches that may prove more effective in counteracting the economic impacts of the crisis. The core argument posits that Lebanon is at a critical juncture where policy decisions hold significant weight in determining the nation's economic destiny.
TopIntroduction
The influx of Syrian refugees has presented Lebanon with a complex economic dilemma. Lebanon's economy was highly dependent on the service sector—especially banking and tourism—prior to the crisis, had insufficient industrial diversification, and had substantial public debt (Ben Hassen, 2021). These already fragile conditions have been further exacerbated by the flood of refugees. The stress on government resources was one of the most pressing problems. The United Nations High Commissioner for Refugees (UNHCR) has registered roughly 1.5 million Syrian refugees in Lebanon (Janmyr, 2022). This has placed additional strain on Lebanon's already overburdened public utilities.
Demand for essential services such as healthcare, education, electricity, and trash management has skyrocketed in response to the sudden increase in the population, bringing some places to the verge of collapse (David et al., 2020). Additionally, the housing market has been saturated, leading in rental price inflation which, in turn, influences the cost of living for the entire population (Nseir, 2022). An inflow of low-skilled workers has boosted competition for jobs and further complicated an already difficult labour market. As a result, incomes have fallen and unemployment and underemployment have become even more widespread in Lebanon. The government's fiscal position has worsened as a result of the growth of the informal economy.
Not only have vital land routes through Syria been closed, but the conflict has also caused a reorientation of commercial partnerships, which has affected trade (De Groot et al., 2022). This has had far-reaching effects on Lebanon's trade balance, necessitating a deliberate re-evaluation of trade ties and pathways. The World Bank predicts that Lebanon's economy will decrease in the years after the crisis due to the cumulative effect of these problems on GDP (Kharroubi et al., 2021).
With little help from abroad, fiscal policy has struggled to keep up with the rising price of housing refugees. The Lebanese government has had to strike a balance between increasing expenditure to help refugees and keeping up with infrastructure and the need to keep public debt from ballooning out of control. Policy solutions in Lebanon have been rendered more complicated by the country's fragile social and political fabric, calling for careful negotiation and consensus-building across varied political and sectarian interests.
Lebanon's society and government have been put to the test by the refugee crisis, which has already strained economic systems. Because of the complexity of the interplay between the economy and broader political and social issues, formulating effective policy responses is difficult (Fakhoury & Stel, 2023). Without a resolution to the Syrian conflict, Lebanon's economy would continue to suffer, necessitating continuous and flexible governmental initiatives.
To alleviate short-term financial crisis and lay the groundwork for long-term economic recovery and stability, the effectiveness of policy reaction during economic crises is vital. When the economy is in a slump, the right policy moves can operate as stabilisers to lessen or heighten the impact of the downturn. These policies, which frequently include monetary and fiscal measures, intend to fix liquidity shortages, restore investor confidence, and provide safety nets for vulnerable populations.
By affecting the money supply and interest rates, monetary policy is crucial in stabilising the economy during times of crisis. In order to stimulate lending and investment, central banks can take unorthodox measures, such as quantitative easing, to inject money into the economy (Rostagno et al., 2021). For instance, in order to stabilise financial markets and stimulate economic activity during the 2008-2009 global financial crisis, major central banks around the world lowered interest rates to record lows and bought massive amounts of financial assets (Tooze, 2018).