Political Instability Costs Lebanon 5% of its GDP

November 01, 2012 | Nisreen Salti
Political Instability Costs Lebanon 5% of its GDP

In the last six years, Lebanon has experienced both war and political instability, including assassinations, bombings, sit-ins, demonstrations, government resignation, and armed clashes.
This paper examines the impact of political instability on the economy between 2005 and 2010. The research reveals that the assassination of Hariri in 2005 and the July 2006 war both had a negative impact on most economic sectors. However, during other periods of instability, there is no evidence to suggest that the various economic sectors such as construction, bank deposits, and tourism were affected.
 
Despite the seemingly resilient economic sectors, the paper demonstrates that the macroeconomic cost of political instability is substantial as it amounts to a decline of 5% of GDP per capita. Most importantly, in the same way that political instability brings economic losses, political stability is accompanied by substantial economic gains. This advantage is illustrated by the improvement of the GDP per capita by 6% after the 2008 Doha agreement.