Damages from Beirut Port explosion estimated at up to $4.6bn, economic losses at up to $3.5bn

Economic Research | Lebanon This Week | Lebanon This Week 646 | Damages from Beirut Port explosion estimated at up to $4.6bn, economic losses at up to $3.5bn | Lebanon | Byblos Bank

You are being redirected to .

 

Please Rotate your screen to portrait, for best viewing.

Byblos Bank

Lebanon This Week 646

|

Damages from Beirut Port explosion estimated at up to $4.6bn, economic losses at up to $3.5bn

The World Bank’s (WB) Rapid Damage and Needs Assessment (RDNA), which it conducted in cooperation with the United Nations (UN) and the European Union (EU), estimated at between $3.8bn and $4.6bn the physical damage from the explosion at the Port of Beirut on August 4. It added that housing, transportation and tangible and intangible cultural assets, such as religious and archeological sites, national monuments and theaters, were the most affected by the explosion. It evaluated the physical damage in the housing sector at between $1.9bn and $2.3bn, followed by damage to the cultural sector at between $1bn and $1.2bn, and damage in the transportation sector and port at between $280m and $345m. It also estimated the damage in the tourism sector at between $170m and $205m, damage in the commerce and industry sector at between $105m and $125m, and damage in the healthcare sector at between $95m and $115m. It also estimated the damage to the financial sector at between $10m and $15m.

In addition, it estimated losses in economic flows due to damaged assets and the subsequent decline in output at between $2.9bn and $3.5bn. It indicated that economic losses in the housing sector range from $1bn to $1.2bn, followed by the transportation sector and port at between $580m and $710m, and the cultural sector at $400m to $490m. It also said that the commerce and industrial sectors incurred between $285m and $345m in losses, while the tourism sector registered losses of between $190m and $235m.

Further, it estimated the public sector's reconstruction and recovery needs for the remainder of 2020 and for 2021 at between $1.8bn and $2.2bn, which consist of $605m to $760m by end-December 2020 and between $1.18bn and $1.46bn in 2021. It estimated the transportation sector's needs at between $425m and $520m, followed by the cultural sector at $250m to $310m, and the housing sector at between $220m and $265m. Also, it pointed out that the financial sector needs between $35m to $45m for recovery and reconstruction.

In parallel, the RDNA expected the explosion at the Port of Beirut to reduce Lebanon’s real GDP growth rates by up to 0.4 percentage point in 2020 and 0.6 percentage point in 2021 due to losses in the stock of physical capital. It also projected import constraints to result in additional reductions in real GDP growth of 0.4 percentage point in 2020 and 1.3 percentage points in 2021. It anticipated additional losses in output due to disruption to economic activity amid "the physical damage to the country’s main port, and to the busy retail and commercial centers of Beirut." It expected government revenues to decrease from 20.8% of GDP in 2019 to 10.7% of GDP in 2020 and to 12.7% of GDP in 2021, due to lower receipts from the value-added tax and customs. It projected the current account deficit to narrow from 22.4% of GDP in 2019 to 8.1% of GDP in 2020 and 0.3% of GDP in 2021, due to the improvement in the trade balance and to higher remittance inflows. It also forecast inflation and poverty rates to increase.

Moreover, the assessment indicated that reconstruction efforts require a combination of interventions that prioritize the needs of the people, particularly the most vulnerable segments, with structural reforms related to "macroeconomic stabilization, governance, the private sector's operating environment, and ensuring human security." It added that international aid and private investments are crucial in order to achieve a comprehensive recovery, given the current economic situation in Lebanon. It noted that the authorities' implementation of a credible reforms agenda is a necessity to access international development assistance and to unlock external and private sector financing.