Lebanese protests will tighten the economic trap

Significance

Lebanon’s debt is reaching unsustainable levels, meaning politicians can no longer delay addressing longstanding structural fiscal and current account deficits. However, public rejection of the political class is mounting.

Impacts

• The return of Gulf tourists to Lebanon could hurt alternative destinations such as Jordan.
• Gulf donors’ efforts to condition financial support on disengagement from Iran will fail, but could limit disbursement.
• If Lebanon suffers a debt and currency crisis, this could spread to other emerging markets.
• Raising a planned 2-billion-dollar bond will be extremely challenging.