What happens if economic crisis?

In a financial crisis, asset prices see a steep decline in value, businesses and consumers are unable to pay their debts, and financial institutions experience liquidity shortages. A financial crisis may be limited to banks or spread throughout a single economy, the economy of a region, or economies worldwide.

What happened to the Lebanese currency?

Since the exchange rate of the Lebanese pound was pegged to the US dollar in 1997 (1 US dollar = 1,507 Lebanese pounds, also referred to as Lebanese lira), and, until 2019, Lebanon’s currency had been fairly stable. But since the economic crisis hit in late 2019, the pound has lost about 90\% of its value.

What causes economic crisis?

Many fundamental causes of the crisis have not been addressed, such as insufficient financial sector regulation, unrealistically high executive compensation (salaries and bonuses), stagnating real wages and consequently rising inequality and debt-financed consumption.

What is meant by economic crisis?

Economic crisis is usually seen as a situation in which the economy of a country experiences a sudden downturn in its aggregate output or real gross domestic product (GDP). The result of the economic crisis is a decline in real income per capita and an increase in unemployment and poverty.

Was Lebanon’s economic crisis predictable?

With hindsight, Lebanon’s economic crisis was predictable. By the time the crisis erupted in October 2019, the economy was facing four extraordinary challenges. First, public sector debt had reached such elevated levels that a default had become a question of when, not if.

What is happening to the Lebanese economy?

An extreme form of wealth destruction is taking place with the Lebanese de facto losing the majority of their bank savings. Meanwhile, four out of every ten Lebanese are out of work, and half the population is under the poverty line.

Is Lebanon’s banking sector facing a collapse?

And with the private sector continuing to default on loans, some believe that Lebanon’s banking sector now has a higher rate of bad debt on its books than the United States did in 2008. As talk of collapse continues to grow, Lebanon remains on course to face arguably the most challenging financial moment in its history.

What are the security implications of Lebanon’s economic implosion?

Equally worrying is the loss of physical productive capacity resulting from widespread business closures. Much more alarming are the security consequences of the economic implosion. Lebanon’s sectarian history is rife with conflict.