<?xml version="1.0" encoding="UTF-8"?><rss version="2.0" xmlns:content="http://purl.org/rss/1.0/modules/content/" xmlns:wfw="http://wellformedweb.org/CommentAPI/" xmlns:dc="http://purl.org/dc/elements/1.1/" xmlns:atom="http://www.w3.org/2005/Atom" xmlns:sy="http://purl.org/rss/1.0/modules/syndication/" xmlns:slash="http://purl.org/rss/1.0/modules/slash/" > <channel> <title>Lebanon – The Musings Of A Politics Junkie & Closet Economist</title> <atom:link href="https://kurtdavisjr.com/tag/lebanon/feed/" rel="self" type="application/rss+xml" /> <link>https://kurtdavisjr.com</link> <description></description> <lastBuildDate>Wed, 16 Oct 2024 14:22:37 +0000</lastBuildDate> <language>en-US</language> <sy:updatePeriod> hourly </sy:updatePeriod> <sy:updateFrequency> 1 </sy:updateFrequency> <generator>https://wordpress.org/?v=6.7.2</generator> <item> <title>Israel’s Expanding War and the Echoes of the American ‘Surge’ Strategy</title> <link>https://kurtdavisjr.com/israels-expanding-war-and-the-echoes-of-the-american-surge-strategy-dc-journal/?utm_source=rss&utm_medium=rss&utm_campaign=israels-expanding-war-and-the-echoes-of-the-american-surge-strategy-dc-journal</link> <dc:creator><![CDATA[Kurt L. Davis Jr.]]></dc:creator> <pubDate>Wed, 16 Oct 2024 02:14:00 +0000</pubDate> <category><![CDATA[Europe]]></category> <category><![CDATA[Middle East / Asia]]></category> <category><![CDATA[United States]]></category> <category><![CDATA[Afghanistan]]></category> <category><![CDATA[Hamas]]></category> <category><![CDATA[Hezbollah]]></category> <category><![CDATA[Iraq]]></category> <category><![CDATA[Israel]]></category> <category><![CDATA[Lebanon]]></category> <category><![CDATA[Syria]]></category> <category><![CDATA[Yemen]]></category> <guid isPermaLink="false">https://kurtdavisjr.com/?p=848</guid> <description><![CDATA[Israel has dramatically escalated its military operations, extending beyond Gaza to include strikes in Lebanon, Yemen and Syria. This expansion marks a significant shift in strategy that borrows heavily from the American playbook while tailoring it to Israel’s unique geopolitical context. As the conflict intensifies, it’s crucial to examine the implications of this approach, not just for the Middle East but for global security and economic stability...]]></description> <content:encoded><![CDATA[<div class="wp-block-image"> <figure class="aligncenter size-full is-resized"><img fetchpriority="high" decoding="async" width="300" height="300" src="https://kurtdavisjr.com/wp-content/uploads/2024/10/bigstock-Haifa-Israel-April-475176925-300x300-1.jpg" alt="" class="wp-image-849" style="width:578px;height:578px" srcset="https://kurtdavisjr.com/wp-content/uploads/2024/10/bigstock-Haifa-Israel-April-475176925-300x300-1.jpg 300w, https://kurtdavisjr.com/wp-content/uploads/2024/10/bigstock-Haifa-Israel-April-475176925-300x300-1-150x150.jpg 150w" sizes="(max-width: 300px) 100vw, 300px" /></figure></div> <p class=""></p> <p class=""><strong><em>This originally appeared in <a href="https://dcjournal.com/israels-expanding-war-and-the-echoes-of-the-american-surge-strategy/" data-type="link" data-id="https://dcjournal.com/israels-expanding-war-and-the-echoes-of-the-american-surge-strategy/">DCJournal.com</a></em></strong></p> <p class="">In recent weeks, Israel has dramatically escalated its military operations, extending beyond Gaza to include strikes in Lebanon, Yemen and Syria. This expansion marks a significant shift in strategy that borrows heavily from the American playbook while tailoring it to Israel’s unique geopolitical context. As the conflict intensifies, it’s crucial to examine the implications of this approach, not just for the Middle East but for global security and economic stability.</p> <p class="">Israel’s campaign bears striking similarities to the U.S. “surge” strategy employed in Iraq and Afghanistan. Like the American approach, Israel aims to use overwhelming force to neutralize threats quickly and create conditions for long-term stability. However, Israel’s version is more focused and time-sensitive, reflecting the immediacy of the threats it faces.</p> <p class="">The Israeli government, still reeling from the October 7 Hamas attack, has concluded that the status quo is no longer tenable. This shift in thinking mirrors the U.S. response to 9/11 when the tolerance for terrorist safe havens evaporated overnight. But while the United States had the luxury of distance, Israel is grappling with threats on its doorstep, necessitating a more urgent and comprehensive response.</p> <p class="">Unlike the U.S. campaigns in Iraq and Afghanistan, Israel is not seeking a prolonged occupation or nation-building exercise. Instead, it’s pursuing a strategy of surgical precision aimed at dismantling the leadership and capabilities of Hamas and Hezbollah. This approach reflects a growing weariness with the “hearts and minds” doctrine that has often proved challenging (some may say ineffective) in counterterrorism efforts.</p> <p class="">Focusing on precision and speed is not just a tactical choice but a strategic necessity. Israel understands that a drawn-out conflict could erode international support and strain its own resources. By emphasizing targeted strikes and limited ground incursions, Israel hopes to achieve its security objectives while minimizing civilian casualties and avoiding the quagmire of long-term occupation. Can surgical strikes alone create the conditions for lasting peace.</p> <p class="">At the heart of Israel’s expanded campaign is Iran. Tehran’s support for Hamas and Hezbollah, coupled with its nuclear ambitions, represents an existential threat to Israel. The current offensive can be seen as an indirect confrontation with Iran aimed at weakening its proxies and deterring further aggression.</p> <p class="">However, this strategy carries significant risks. Any miscalculation could lead to direct conflict with Iran, potentially drawing in other regional powers and escalating into a wider war. The international community, particularly the United States, must tread carefully in its support for Israel, balancing the need for deterrence against the risk of uncontrolled escalation.</p> <p class="">The potential economic consequences of this conflict cannot be overstated. Any disruption to oil supplies from the Middle East could send shockwaves through the global economy. With the U.S. presidential election on the horizon, the effect on energy prices could become a pivotal issue, influencing domestic politics and international relations.</p> <p class="">Policymakers in Washington must be prepared for various scenarios, including the possibility of Israeli strikes on Iranian oil infrastructure. The most discussed target is the Kharg oil terminal, which handles 80 percent to 90 percent of oil exports, most of which are destined for China. Such an action would spike oil prices and lead to retaliatory measures that further destabilize the region and global markets.</p> <p class="">As Israel pursues this high-stakes strategy, it must maintain clear objectives and an exit strategy. The goal should be to neutralize immediate threats and create a more favorable security environment, not to become entangled in an open-ended conflict.</p> <p class="">For the United States, the challenge lies in supporting its ally while preventing further escalation. This will require deft diplomacy, leveraging relationships with other regional powers to contain the conflict and push for a sustainable resolution.</p> <p class="">The international community must also play a role in mediating the current crisis and addressing the underlying issues that fuel conflict in the region. This includes renewed efforts to resolve the Israeli-Palestinian conflict and a comprehensive approach to curbing Iran’s destabilizing activities.</p> <p class="">Israel’s expanded war represents a calculated gamble to reshape the security landscape of the Middle East. While the strategy draws from American experiences, it’s tailored to Israel’s unique position and threats.</p> <p class="">As the situation unfolds, we must remember the lessons of past conflicts. No matter how precise, military action alone rarely solves deep-seated political and social issues. For lasting peace, Israel and its allies must couple their military strategy with robust diplomatic efforts and a clear vision for post-conflict reconstruction and governance.</p> <p class="">The echoes of American strategy in Israel’s actions are clear. Now, we must hope that Israel has learned not just from America’s initial interventions but from the complex, often painful aftermath of those conflicts. The stability of the Middle East — and perhaps the world — may depend on it.</p> <hr class="wp-block-separator has-css-opacity"/> <p class=""></p> ]]></content:encoded> </item> <item> <title>Top 10 Economies to Watch in 2022</title> <link>https://kurtdavisjr.com/top-10-economies-to-watch-in-2022-south-africa-brazil-china-mexico-france-spain-thailand-uae-saudi-arabia-united-kingdom-lebanon/?utm_source=rss&utm_medium=rss&utm_campaign=top-10-economies-to-watch-in-2022-south-africa-brazil-china-mexico-france-spain-thailand-uae-saudi-arabia-united-kingdom-lebanon</link> <dc:creator><![CDATA[Kurt L. Davis Jr.]]></dc:creator> <pubDate>Fri, 24 Dec 2021 13:00:18 +0000</pubDate> <category><![CDATA[Africa]]></category> <category><![CDATA[Europe]]></category> <category><![CDATA[Latin America]]></category> <category><![CDATA[Middle East / Asia]]></category> <category><![CDATA[Boris Johnson]]></category> <category><![CDATA[Brazil]]></category> <category><![CDATA[China]]></category> <category><![CDATA[Covid-19]]></category> <category><![CDATA[Economic Recovery]]></category> <category><![CDATA[Economy]]></category> <category><![CDATA[Emmanuel Macron]]></category> <category><![CDATA[France]]></category> <category><![CDATA[Jair Bolsonaro]]></category> <category><![CDATA[Japan]]></category> <category><![CDATA[Lebanon]]></category> <category><![CDATA[Mexico]]></category> <category><![CDATA[Saudi Arabia]]></category> <category><![CDATA[South Africa]]></category> <category><![CDATA[Spain]]></category> <category><![CDATA[Thailand]]></category> <category><![CDATA[UAE]]></category> <category><![CDATA[United Kingdom]]></category> <guid isPermaLink="false">https://kurtdavisjr.com/?p=526</guid> <description><![CDATA[Vaccines gave hope going into 2021…fast forward a year later and the omicron variant is not providing the same confidence, especially with much of the globe still not fully vaccinated and / or without a booster shot. Such a reality has created renewed economic uncertainty. As we enter 2022, there are several countries whose economic trends will provide some insight into the global economy going forward...]]></description> <content:encoded><![CDATA[ <div class="wp-block-image is-style-default"><figure class="aligncenter size-full"><img decoding="async" width="711" height="460" src="https://kurtdavisjr.com/wp-content/uploads/2021/12/economic-growth.jpg" alt="" class="wp-image-536" srcset="https://kurtdavisjr.com/wp-content/uploads/2021/12/economic-growth.jpg 711w, https://kurtdavisjr.com/wp-content/uploads/2021/12/economic-growth-300x194.jpg 300w" sizes="(max-width: 711px) 100vw, 711px" /><figcaption>(Photo Credit: Getty)</figcaption></figure></div> <hr class="wp-block-separator"/> <h4 class="has-text-align-center has-medium-font-size wp-block-heading"><strong><em><em><em><em><em><em><em>The bellwether economies for 2022…</em></em></em></em></em></em></em></strong></h4> <hr class="wp-block-separator"/> <div style="height:20px" aria-hidden="true" class="wp-block-spacer"></div> <p>Vaccines gave hope going into 2021…fast forward a year later and the omicron variant is not providing the same confidence, especially with much of the globe still not fully vaccinated and / or without a booster shot.</p> <p>Such a reality has created renewed economic uncertainty. As we enter 2022, there are several countries whose economic trends will provide some insight into the global economy going forward.</p> <h3 class="wp-block-heading"><strong>South Africa</strong></h3> <p class="has-medium-font-size"><em>Omicron, travel bans, and bad luck…things must change in 2022?</em></p> <p>The IMF forecasts sub-Saharan Africa to grow 3.8% in 2022, but that number does not capture the reality of Africa’s largest economies, especially in South Africa. Angola and Nigeria can blame oil demand and prices…South Africa, however, will largely be staring in the mirror.</p> <p>Years of mismanagement of government funds and entities have led to today’s reality with power blackouts undercutting economic growth, particularly in the mining sector, and the last of foreign investors constantly contemplating their exit from the country.</p> <p>Covid-19 has not helped the economic situation with unemployment north of 30% and riots bringing Johannesburg to a standstill back in July. The discovery of Omicron by South African scientists also troubled the country. No good deed goes unpunished (so they say) as the world implemented travel bans and devastated South Africa’s tourism industry before it could kick-off the busy season. In 2022, tourism will sadly remain at the mercy of the world’s ability to navigate covid-19, which is looking less and less promising as the holiday season in many countries hit full stride with a mix of various lockdowns and curfews.</p> <p>South Africans will be looking to mining AGAIN in 2022 to formulate any form of economic recovery. But it is hard to imagine similarly record-high commodity prices. For example, platinum group metals, such as palladium and rhodium, topped $2,950 and $30,000 per ounce respectively in 2021 as compared to prices below $2000 and $8,000 in May 2020. According to the Economist, South Africa last had economic growth of 6% more than 40 years ago. A year of sustained quarterly growth would be welcomed and a sign that things are changing for the better…yet that may also be too high of a bar.</p> <h3 class="wp-block-heading"><strong>Mexico</strong></h3> <p class="has-medium-font-size"><em>In need of a stimulus plan and better supply chain access…</em></p> <p>It is easy to forget how bad 2020 was for some countries. For example, the Mexican economy contracted more than 8% in 2020. In some odd irony (or mishap), the administration of Mexico’s President Andrés Manuel López Obrador is constantly touting 6% “economic growth” in 2021. But the truth (or math) behind that 6% is that Mexico has a long way to go to return to pre-pandemic GDP levels.</p> <p>The economy slowed in Q3 2021 with the Mexican industrial sector growing only 0.3% in Q3 2021, compared to 0.4% in Q1 and 0.8% in Q2, according to Deloitte. The rising prices of raw materials and constant disruption in global supply chains continue to undercut the industrial sector and the greater economic recovery in the country, such that the 6% economic growth in 2021 may be an overstatement.</p> <p>The forecasted 3.3% economic growth in 2022, according to the IMF, also looks fragile. Obrador’s reluctance to spend too much money during the pandemic, however, suggests his administration could pump more money into the economy today to lift economic growth prospects going into next year…Mexico earmarked about 2% of GDP to pandemic relief while Latin American, on average, allocated 8.5%. Still, Obrador’s team will have to be quite crafty to create a stimulus plan to spark the economy while not triggering an inflation issue and avoiding the boobytraps of increasing interest rates. That is easier said than done, especially when social programs are political footballs and raising tax revenue is not exactly easy in Mexico.</p> <h3 class="wp-block-heading"><strong>China</strong></h3> <p class="has-medium-font-size"><em>It is not Japan in the 1990s but there are underlying problems…</em></p> <p>Japan, in the 1990s, endured a prolonged recession following an economic bubble in the 1980s. The stories of the Japanese economy eclipsing the American economy quickly evaporated into the well-documented “lost decade,” which involved a recession accompanied by a financial crisis and excess debt.</p> <p>There are some similarities to China. The Chinese struggled in the third quarter of 2021 with annualized economic growth dipping below 1% – still above 0% but far from the 6-8% that the world is accustomed to with China. The collapse in the real estate market choked off economic growth while repeated lockdowns (via China’s “covid zero” approach) seemingly created a few economic false starts for the country. An energy crisis is only further fueling the problem as coal and natural gas prices hit record highs.</p> <p>Yet Chinese Vice-Premier Liu He says China is on track to beat its GDP growth target of ‘above 6%’ this year. If this is true, then maybe China has the resiliency to stabilize the economy and maintain growth within a reasonable range, as characterized by Chinese leadership. Some economists forecast a period of stagflation, which may be an overstretch based on the Q4 numbers to date. On the other hand, forecasting more than 6% economic growth sounds brazen in today’s market for China. Maybe 3% or 4% is more reasonable…but then again China growing at 3% will likely mean a downturn in commodity prices due to shrinking Chinese demand and a general global slowdown (as China’s economic growth is a driving factor for demand and supply numbers in various markets across the globe).</p> <h3 class="wp-block-heading"><strong>Brazil</strong></h3> <p class="has-medium-font-size"><em>It is election time…</em></p> <p>“I’m back!” recently announced Brazil’s former President Luiz Inácio Lula da Silva…It is not clear if we should be watching Brazil because of its politics or its economy. First, the general election will be held on October 2, 2022. The return of former president, Luiz Inácio Lula da Silva, continues to be the backdrop to any decision by current President Jair Bolsonaro, except, in 2022, there could be actual consequences at the ballot box.</p> <p>Lula’s overshadowing presence helps to explain Bolsonaro’s economic decisions. His pandemic relief programs, which included monthly payments of R$600 to roughly 68 million Brazilians with single mothers receiving roughly R$1,200, are not exactly the conservative federal spending championed by Bolsonaro in his campaigns. The spending may have helped Brazil in 2021 with economic growth still tracking for more than 5%.</p> <p>However, the outlook for 2022 appears grim with economists at Latin America’s largest bank, Itau Unibanco, forecasting a potential recession at negative 0.5% growth. The change to negative 0.5% growth in 2022 reflects aggressive actions taken by the Brazilian central bank to hike benchmark interest rates. Itau imagines the rate could climb to 11.25% as the central bank focuses on controlling inflation. The interest rate hike will puncture an already fragile recovery. Another wave of covid due to Omicron or any other variant thereafter could effectively undue the recovery altogether with less than 50% of the Brazilian population fully vaccinated.</p> <p>The economy and early polls suggest Lula has a good chance to retake the presidency. But Brazilians sadly must be asking if that will change the country’s situation. The economic challenges coupled with covid-19 are not resolved by simply changing presidents…Lula’s supporters can ask supporters of President Joe Biden about the process of escaping the covid-19 malaise.</p> <h3 class="wp-block-heading"><strong>Saudi Arabia</strong></h3> <p class="has-medium-font-size"><em>More than oil…</em></p> <p>Saudi Arabia’s Oil Minister Abdulaziz bin Salman is warning of a potential energy crisis because investment in oil is dropping, which could create a supply deficit over the long-term. Critics will say the message and warning is self-serving for a country that has built it wealth on the back of healthy oil prices. That said, the International Energy Agency forecasts 2030 oil demand to remain steady with pre-covid demand in 2019 (approximately 100 million barrels per day). The Saudi oil minister imagines production could fall by 30 million barrels per day to 70 million barrels per day. If true, all these numbers bid well for the kingdom and it oil reserves.</p> <p>But it is not only oil that has political and economic analysts paying close attention. Saudi Arabia forecasts 7.4% economic growth in 2022 (after 2.9% this year) along with its first budget surplus since 2013 (when average closing price for oil was nearly $98 per barrel). The oil crash in 2014 wiped out Saudi budget surpluses. This time, Saudi leadership will deliver a surplus without $100 oil. Also 2022 is likely not 2013 where economic growth was strong in China and the U.S.</p> <p>To achieve this surplus, the world’s biggest exporter has, in the words of Finance Minister Mohammed bin Abdullah Al-Jadaan, decoupled government expenditures from revenue. Saudi leadership is reducing military spending after already reducing social expenditures during covid last year and simply sticking the extra cash in the government reserves. The budget does depend on an oil price of $70 per barrel. That number itself will be an indicator of global supply and demand across various sectors. A striving Saudi economy irrespective of the price movement will say a lot more about the changing GCC and regional economic ingenuity amid a pandemic, oil price uncertainty, and not exactly ideal political harmony (for example, good relations with Israel have been offset by more strained relations with Iran).</p> <h3 class="wp-block-heading"><strong>Thailand</strong></h3> <p class="has-medium-font-size"><em>How quick can tourism ramp up?</em></p> <p>Southeast Asia’s second largest economy was on the list last year because it was a question of when tourism would return. Going in 2022, the question is how quickly can tourism ramp up? Most studies suggest that tourism in Thailand will not return to pre-pandemic levels until 2024. And that number assumes there are no major travel shutdowns and there is steady tourism mixed with overall economic growth across the globe. The omicron border closures and restrictions (including the re-tightening of the Thailand entry rules) are a perfect example of how vulnerable that trajectory could be with new variants.</p> <p>Thailand is expected to grow 3.5% to 4.5% in 2022 following an estimated growth of 1.2% this year. The 1.2% looks partially promising, considering passengers on international flights to Thailand were down 95% in September 2021 compared to 2019 and hotels only filled 9% of their rooms, according to a study by McKinsey & Company. Optimism nevertheless can only go so far…finding a way to get people on a plane to Thailand should be the major focus and may require being creative with other countries on how to ensure individuals can travel cross-border and be properly tested such that both resident and host countries feel secure. Thailand can rest assured other Asian countries will be watching their efforts.</p> <h3 class="wp-block-heading"><strong>United Kingdom (UK)</strong></h3> <p class="has-medium-font-size"><em>Despite the covid news, steady growth endures…</em></p> <p>The UK is the darling for covid jokes…it has struggled to control its cases as well as the narrative around its approach. When the country’s pandemic restrictions, including social distancing and masks requirements, were lifted in July, supporters and critics alike of Prime Minister Boris Johnson were concerned. To be fair Johnson’s announcement on July 19<sup>th</sup> was only about two weeks after Johnson’s American counterpart, President Biden, declared victory against covid. Today, both may regret their summer optimism and messaging. Requiring individuals to course-correct on behavior, i.e. return to previous measures such as masks, is easier said than done as people are rightfully frustrated about the situation.</p> <p>Putting covid aside, the UK economy appears rather resilient. GDP growth is still expected above 6% for 2021 and, while accounting for a slowdown next year, GDP growth is expected to be about 5% in 2022. The economy should also reach pre-pandemic levels in the first quarter of 2022. That said, inflation remains an issue as UK inflation hit a 10-year high in November at 5.1% and may hit 6% by April 2022. The Bank of England took a major first step in fighting inflation with the recent interest rate hike from 0.1% to 0.25%. If the UK can control covid-19 numbers and steady inflation, then credit should go to Johnson. But then again, he may have already lost the narrative on that story despite what looks like a relatively positive outcome.</p> <h3 class="wp-block-heading"><strong>France</strong></h3> <p class="has-medium-font-size"><em>Let’s see how Europe fares…</em></p> <p>The French economy is going strong into 2022 with economic growth expected to be more than 6% in 2021 and north of 4% in 2022. Following the lifting of the lockdown in May, the French economy benefited from a successful vaccination program, i.e. going from about 15% in May to more than 70% today, and pent-up enthusiasm for consumption. Household consumption grew 5% between the 2<sup>nd</sup> quarter and 3<sup>rd</sup> quarter of this year.</p> <p>France will not have similar numbers to end the year or in 2022 as the same favorable conditions do not exist. There is not a similar level of pent-up consumption waiting to be released and covid-19 numbers are increasing. Supply chains also remain fractured which has notably hurt French manufacturing, for example in the automobile sector.</p> <p>President Emmanuel Macron will be focused on curing the supply chain problems, especially as he faces re-election in April. He will also assume the presidency of the Council of the European Union in January and should be focused on supporting the revival of other European Union economies in that role. If Macron has economic success, maybe other countries in Europe can take a few pointers. </p> <h3 class="wp-block-heading"><strong>Spain</strong></h3> <p class="has-medium-font-size"><em>Another European bellwether or simply misleading statistics?</em></p> <p>Most observers are struggling to assess the Spanish economy. A soaring job market and growing tax revenue usually suggests good news for an economy. Yet the discussion on the Spanish economy is centered on missed economic growth targets in the last couple quarters and how it is falling behind its neighbor France. Prime Minister Pedro Sánchez’s administration continues to argue that the country will hit economic growth of 6.5% in 2021 and roughly 7% in 2022, while the European Commission forecasts economic growth of 4.5% in 2021 and 5.5% in 2022. The debate over who is right is becoming more political day by day.</p> <p>The national statistics institute is now in the middle of this debate after it adjusted economic growth numbers for the 2<sup>nd</sup> quarter down to 1.1% from the previously reported 2.8%, which suggests 6.5% for year is not possible. Beyond the GDP estimates, inflation is at record high and Sanchez is ready to spend as much as necessary to achieve such growth numbers. It doesn’t help that many critics believe he is spending with a focus on the 2023 election. The skepticism and lack of certainty on numbers makes Spain a tough case to assess. Still many economists will be watching Spain as a bellwether for Western Europe (alongside with France).</p> <h3 class="wp-block-heading"><strong>United Arab Emirates (UAE)</strong></h3> <p class="has-medium-font-size"><em>Leading the Middle East recovery…</em></p> <p>The United Arab Emirates (UAE) has generally been open since mid-2020. As a result, tourism continues to storm back, buoyed by Expo 2020 attendees and the usual holiday trek for Europeans to Dubai (which has beaches crowded and restaurants and bars fully booked). Many arrivals to Dubai have chosen to stay long term (or until covid is over…if ever) and purchased property which has been a boon to real estate and consumer spending for the country. Oil production and prices also help the UAE economy while foreign investors are happy to invest in a country where local currency is effectively pegged to the dollar thus reducing currency risk. Accordingly, the UAE central bank forecasts the UAE economy to grow 2.1% in 2021, which is nearly double expectations at the end of last year, and to grow 4.2% in 2022.</p> <p>Although most economic indicators are positive, the UAE still faces some challenges. Can Dubai become a long-term option for remote workers? The number of advertisements on European television this year for Dubai in relation to remote work feels less. Can the UAE encourage more people to visit AND live here? More residents spending would help…some data suggests expats living here do not spend (as a % of income) like they did in pre-pandemic times. Thus, it is either more residents or boost resident spending. The track record of UAE leadership suggests the country can and will focus on both goals simultaneously with other ambitions. </p> <h2 class="wp-block-heading"><strong>Honorable Mention…</strong></h2> <h3 class="wp-block-heading"><strong>Lebanon</strong></h3> <p class="has-medium-font-size"><em>Not a bellwether but rather a question of global resilience…</em></p> <p>It is fair to assume that nobody is watching Lebanon as a bellwether for a global recovery. The country remains mired in an economic crisis with the Lebanese currency down more than 90% in the last two years and skyrocketing inflation. The queues for basics, such as food and petrol, are disheartening. And most foreign investors are avoiding the place. It is estimated that 75% to as much as 85% of the Lebanese population is living below the poverty line.</p> <p>People are generally avoiding the country until something changes. Some Lebanese living outside the country may still visit the country but nowhere at a level to replicate the 17-20% that tourism contributed to Lebanon’s pre-pandemic GDP. The new government formed in September led by Prime Minister Najib Mikati, who has previously twice held the position, wants to turn a new page. But so many factors are working against Mikati: the port explosion remains an eyesore for Beirut, wealthy and educated Lebanese continue to leave the country thus further eradicating Lebanon’s tax base; and previous partners appear unwillingly to bailout the country. Thus, why is Lebanon important to watch? Lebanon is a friend of many but does not have any one country willing to support it. If it can find a way out of its current state, it will be a telling story for some downtrodden economies in this ‘covid’ world. Lebanon is not Afghanistan, Sudan, or Tunisia. But let’s assume those countries (and many others) may be watching to understand how Lebanon overcomes its current situation.</p> <hr class="wp-block-separator"/> ]]></content:encoded> </item> <item> <title>Could Tunisia Be Heading Down The Same Route As Lebanon?</title> <link>https://kurtdavisjr.com/could-tunisia-be-heading-down-the-same-route-as-lebanon/?utm_source=rss&utm_medium=rss&utm_campaign=could-tunisia-be-heading-down-the-same-route-as-lebanon</link> <dc:creator><![CDATA[Kurt L. Davis Jr.]]></dc:creator> <pubDate>Tue, 31 Aug 2021 16:30:22 +0000</pubDate> <category><![CDATA[Africa]]></category> <category><![CDATA[Middle East / Asia]]></category> <category><![CDATA[Arab Spring]]></category> <category><![CDATA[Bonds]]></category> <category><![CDATA[Hichem Mechichi]]></category> <category><![CDATA[Lebanon]]></category> <category><![CDATA[Najib Mikati]]></category> <category><![CDATA[President Kaïs Saïed]]></category> <category><![CDATA[Sovereign Debt]]></category> <category><![CDATA[Tunisia]]></category> <guid isPermaLink="false">https://kurtdavisjr.com/?p=504</guid> <description><![CDATA[The world is chaotic: Covid-19, economic uncertainty, and war. Amid the signs of chaos, it is said that the obvious signs of danger or opportunity can be missed. But no one is missing the power grab being made by Tunisia's President Kaïs Saïed, following the recent dismissals of ministers, including Prime Minister Hichem Mechichi, and Minister of Economy, Finance and Investment Support Ali Kooli, and the suspension of parliament. Saïed also recently announced plans to strip legislators of immunity and assume power of the state prosecutor’s office. But is this danger or opportunity? The most obvious comparison to this situation is Lebanon…but to what extent is Tunisia like Lebanon?]]></description> <content:encoded><![CDATA[ <div class="wp-block-image"><figure class="aligncenter size-large"><img decoding="async" width="1024" height="586" src="https://kurtdavisjr.com/wp-content/uploads/2021/08/Tunisia-lebanon.jpg" alt="" class="wp-image-505" srcset="https://kurtdavisjr.com/wp-content/uploads/2021/08/Tunisia-lebanon.jpg 1024w, https://kurtdavisjr.com/wp-content/uploads/2021/08/Tunisia-lebanon-300x172.jpg 300w, https://kurtdavisjr.com/wp-content/uploads/2021/08/Tunisia-lebanon-768x440.jpg 768w, https://kurtdavisjr.com/wp-content/uploads/2021/08/Tunisia-lebanon-750x429.jpg 750w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>Tunisian President Kais Saied raises his fist to bystanders as he strolls along the avenue Bourguiba in Tunis, Tunisia on Sunday, 1 August 2021. (Photo Credit: Slim Abid/Tunisian Presidency via AP)</figcaption></figure></div> <p><strong><em>This originally appeared on TheAfricaReport.com</em></strong></p> <div style="height:20px" aria-hidden="true" class="wp-block-spacer"></div> <p><strong>The world is chaotic: Covid-19, economic uncertainty, and war. Amid the signs of chaos, it is said that the obvious signs of danger or opportunity can be missed. But no one is missing the power grab being made by Tunisia’s President Kaïs Saïed, following the recent dismissals of ministers, including Prime Minister Hichem Mechichi, and Minister of Economy, Finance and Investment Support Ali Kooli, and the suspension of parliament. Saïed also recently announced plans to strip legislators of immunity and assume power of the state prosecutor’s office. But is this danger or opportunity? The most obvious comparison to this situation is Lebanon…but to what extent is Tunisia like Lebanon?</strong></p> <p>Both countries are struggling to navigate democracy in some form. Tunisia secured independence in 1957 under revolutionary (and Tunisian lawyer) Habib Bourguiba, who served as the first president of Tunisia until 1987 when he was overthrown by Zin El Abidine Ben Ale. Ali was toppled from government in 2011 during the Arab Spring and replaced by a representative democratic republic. Lebanon gained independence from France in 1943 and, through a mix of internal conflict and civil war, established a sectarian power-sharing democracy.</p> <p>Democracy is loose term for both countries as the general focus is<strong> managing the diversity</strong> (or, in the words of critics, the sectarian nature) of the population and the politics.</p> <p>Tunisia has had eight prime ministers in ten years since the toppling of Ben Ali, and Lebanon is betting on ex-Premier Najib Mikati to form a government after former Prime Minister Saad Hariri failed to do so most recently in the last year. Hariri was forced to resign as prime minister in 2019 after protests. Najib served as prime minister from 2011 to 2014 after Hariri’s first tenure.</p> <p>The Tunisian story may be different from Lebanon with Saïed being elected two years ago as an admonishment to the political class. His popularity is partly built on the reality that he has no political experience. He won 73% of the vote in 2019 with significant support from young Tunisians who viewed the constitutional law professor as a principled (and incorruptible) revolutionary. </p> <p><strong>Yet his ban on public gatherings and raiding of media outlets</strong> has placed Saïed in a bind between upholding democracy and controlling the system. That is not exactly different from the Lebanon situation where each new prime minister is attempting to form a government as a demonstration of not just one individual’s ability but the country’s ability to sustain a democracy and control the system</p> <h3 class="wp-block-heading">Financial desert or financial cliff…</h3> <p>Lebanon defaulted on its sovereign debt in 2020 and has yet to recover. The currency continues to plummet with the Lebanese pound now consistently above 20,000 to the dollar on the black market. The government is running out of hard currency and locals are struggling in the search for basic staples, such as bread, and other necessities, such as power and petrol.</p> <p><strong>The inability of Lebanese leaders to form a government</strong> has effectively blocked the country from receiving the $20+ billion aid being held up by the international community.</p> <p>Tunisia has requested IMF financial support but faces a similar level of criticism and a growing credibility deficit like Lebanon. No one (or maybe a few) are saying the country is going the “Lebanon way”.</p> <p><strong>Although bond prices dropped after Saïed suspended parliament on 26 July,</strong> they are not priced like the Lebanese March 2020 bonds back in February 2020 when reports emerged that the Lebanese government was leaning towards a non-repayment of the debt.</p> <p>Additionally, the yields have already recovered 200 basis points for some of the Tunisian debt – the January 2025 bonds, for example, have seen the yield drop low to 9% compared to 11+% on 27 July. Foreign reserves have declined slightly to $8.9bn at the end of June 2021 compared to about $9.8bn at the end of 2020.</p> <p>None of these number suggest a Lebanon-style crash. Though the Lebanon crash was sudden and unexpected by many observers – or better said, <strong>the crash was imagined by some economists</strong> (with many economists ignoring signs of distress because Lebanon always “finds a way to survive” either through aid from neighbours or new sovereign debt.).</p> <p>But again…there remains the question of whether Tunisia can become Lebanon. It faces similar financial issues with state-owned entities such as the national airline, Tunisair, and a few state banks. Plugging the gaps at those entities and addressing existing debt maturities will put stress on the system with reserves likely only to cover two years – this analysis of remaining life for foreign reserves, however, assumes an inability to refinance debt.</p> <p><strong>Refinancing existing debt only looks less likely today</strong> because the political situation is uncertain…but is it uncertain enough for other counties, such as the United States and France, to turn and walk away?</p> <p>That sounds hard to believe.</p> <p>Tunisia will likely also benefit from the regional rivalry that pits countries, such as Turkey and Qatar against Saudi Arabia and the UAE, provided one or two of those country is willing to provide aid. The country also received a $745m emergency assistance loan from the IMF in April 2020.</p> <h3 class="wp-block-heading">Bottom line</h3> <p>Neither Tunisians nor Lebanese view their countries as models for democracy. But recent reactions by other countries to Tunisia and a continued flow of funds into the country from the international community suggests that Tunisia is still on the right side with enough people (and countries). But then again, so was Lebanon until it was not.</p> <hr class="wp-block-separator"/> <p></p> ]]></content:encoded> </item> <item> <title>Covid-19, Political Unrest, and Economic Challenges: Five Countries To Watch Closely in the Second Half of 2021</title> <link>https://kurtdavisjr.com/covid-19-political-unrest-and-economic-challenges-five-countries-to-watch-closely-in-the-second-half-of-2021-south-africa-india-thailand-brazil-lebanon/?utm_source=rss&utm_medium=rss&utm_campaign=covid-19-political-unrest-and-economic-challenges-five-countries-to-watch-closely-in-the-second-half-of-2021-south-africa-india-thailand-brazil-lebanon</link> <dc:creator><![CDATA[Kurt L. Davis Jr.]]></dc:creator> <pubDate>Tue, 17 Aug 2021 16:36:24 +0000</pubDate> <category><![CDATA[Africa]]></category> <category><![CDATA[Latin America]]></category> <category><![CDATA[Middle East / Asia]]></category> <category><![CDATA[2021]]></category> <category><![CDATA[Brazil]]></category> <category><![CDATA[Brazil Elections]]></category> <category><![CDATA[Covid-19]]></category> <category><![CDATA[Cyril Ramaphosa]]></category> <category><![CDATA[Economic Recovery]]></category> <category><![CDATA[Enoch Godongwana]]></category> <category><![CDATA[India]]></category> <category><![CDATA[Jair Bolsonaro]]></category> <category><![CDATA[Lebanon]]></category> <category><![CDATA[Prime Minister Narendra Modi]]></category> <category><![CDATA[South Africa]]></category> <category><![CDATA[Thailand]]></category> <category><![CDATA[Tito Mboweni]]></category> <guid isPermaLink="false">https://kurtdavisjr.com/?p=491</guid> <description><![CDATA[On a global scale, people are angry at the current health and economic environment with protests becoming increasingly prevalent. The question for political analysts and investors is whether the anger and unrest boils to an unsustainable level for some countries....]]></description> <content:encoded><![CDATA[ <div class="wp-block-image is-style-default"><figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="683" src="https://kurtdavisjr.com/wp-content/uploads/2021/08/Protests-Pic-1024x683.jpg" alt="" class="wp-image-492" srcset="https://kurtdavisjr.com/wp-content/uploads/2021/08/Protests-Pic-1024x683.jpg 1024w, https://kurtdavisjr.com/wp-content/uploads/2021/08/Protests-Pic-300x200.jpg 300w, https://kurtdavisjr.com/wp-content/uploads/2021/08/Protests-Pic-768x512.jpg 768w, https://kurtdavisjr.com/wp-content/uploads/2021/08/Protests-Pic-1130x753.jpg 1130w, https://kurtdavisjr.com/wp-content/uploads/2021/08/Protests-Pic-750x500.jpg 750w, https://kurtdavisjr.com/wp-content/uploads/2021/08/Protests-Pic.jpg 1200w" sizes="auto, (max-width: 1024px) 100vw, 1024px" /><figcaption>Pro-democracy protesters hold up the three-finger salute during an anti-government rally in Bangkok. <br>(Photo Credit: Lillian Suwanrumpha/AFP via Getty Images)</figcaption></figure></div> <hr class="wp-block-separator"/> <h4 class="has-text-align-center wp-block-heading"><strong><em><em><em><em><em><em><em>Can these five countries fix their current situations?</em></em></em></em></em></em></em></strong></h4> <hr class="wp-block-separator"/> <div style="height:20px" aria-hidden="true" class="wp-block-spacer"></div> <p>At the start of the year, vaccines and feelings of hope could have been the theme.</p> <p>Yet rising covid-19 numbers and a growing number of variants has elevated the tensions over vaccines (and mask mandates) while slowing economies have struck at the hope (or aspiration) for V-shaped recoveries.</p> <p>The lack of turnaround would be ‘okay’ per se if the failure of full-blown recoveries did not also appear to be weakening the social and political fabric of many emerging market countries.</p> <p>On a global scale, people are angry at the current health and economic environment with protests becoming increasingly prevalent. The question for political analysts and investors is whether the anger and unrest boils to an unsustainable level for some countries.</p> <p>Below are five countries to watch closely in the remaining months of 2021.</p> <p class="has-medium-font-size"><strong>Lebanon</strong></p> <p class="has-normal-font-size"><em>Not catching a break with a sovereign default, port explosion, and covid-19 in the last 18 months…</em></p> <p>If the world was not grappling with covid-19, Lebanon would be the big economic storyline. The economic situation, simply put, is a disaster with the World Bank writing, “the Lebanon financial and economic crisis is likely to rank in the top 10, possibly top three, most severe crises episodes globally since the mid-nineteenth century.” Lebanese have witnessed the country’s currency plummet 95% against the dollar with the Lebanese pound now trading at 22,000 to the dollar on the black market. The government is running out of hard currency to subsidize staple products, including medicine and gas, with shelves empty in pharmacies and long queues at the gas station. The exit of Saad Hariri and entrance of billionaire businessman Najib Mikati sadly cannot fix the sectarian nature of politics in the country and the lack of foreign financial support. Now discussions of an army unable to pay its soldiers highlight the slow deterioration of public institutions in a country once viewed as the cosmopolitan haven of the Middle East. The world will continue to look to France, Saudi Arabia, and the U.S. for support…yet those three countries may not be aligned on next steps. If the usual allies do not help and international financial institutions sit on their hands, the admired Lebanese hope and perseverance that found its revival in the 1990s following the end of a brutal civil war may die. To be fair, that hope has fought a port explosion, economic collapse, and a covid-19 pandemic in the last 18 months. </p> <p class="has-medium-font-size"><strong>South Africa</strong></p> <p class="has-normal-font-size"><em>Covid-19 is exacerbating economic challenges and disparities…</em></p> <p>The road to fixing the economy in South Africa was always going to be hard for President Cyril Ramaphosa. But the protests last month initially motivated by the jailing of ex-president Jacob Zuma demonstrated the political and economic challenges of the country. The protests quickly escalated to mass looting and the destruction of business and personal property underpinned by pent-up anger and frustration from many South Africans whose lives have economically snowballed downward. Many are jobless, poor and view their government as corrupt. Covid-19 exacerbates the situation with lockdowns punishing the poorest South Africans as wealthier South Africans has space at home to work and money to buy goods. The ban on selling alcohol felt maternalistic with wealthier South Africans hosting parties with alcohol in their gated communities. The economic disparity is not new (nor unique to South Africa) but covid-19 shined a light on the traumatic and disparaging effect of it. And things may only get worse before they get better. The appointment of Ramaphosa’s close ally Enoch Godongwana to succeed Tito Mboweni felt like a shakeup but it is believed that the former Central Bank governor Mboweni was ready to leave the job. Mboweni’s exit has some parallel symbolism to the feelings of international investors (who have slowly exited the country). The path forward for the country will be fraught with struggling commodity production, weakened African financial markets, and a battered private sector plus a potential influx of foreigners from struggling neighboring countries. So it goes…the Rainbow Nation really needs the storm to stop and the rainbow to return.</p> <p class="has-medium-font-size"><strong>Brazil</strong></p> <p class="has-normal-font-size"><em>Maybe a presidential race in 2022 can spur some change…</em></p> <p>President Jair Bolsonaro is facing his biggest challenge as covid-19 endures in South America’s biggest country. The protests against masks and fights over lockdowns poorly mask (no pun intended) the increasing economic challenges in the country with federal social spending unable to solve for slow growth and lack of a pandemic solutions. The spending under the <em>auxilio emergencial</em> program, which provided monthly payments of R$600 to roughly 68 million Brazilians during the pandemic with single mothers receiving R$1,200, helped to win support initially during the covid-19 pandemic. The payments were later cut by 50% in September (with families receiving R$300). The smaller payments and lack of turnaround in the economy gradually weakens Bolsonaro’s political position as each day passes. The return of former Brazilian President Luiz Inacio Lula da Silva only frustrates the situation as economic angst and anxiety will be fueled by the conspicuous emerging political race between Lula and Bolsonaro. A presidential race usually spurs the necessary change with the current president attempting to demonstrate results and the opponent emphasizing the shortcoming in the current system…in Brazil, there is little indication that Bolsonaro will make drastic policy changes simply because Lula is attempting to reclaim the presidency. Thus, Brazil may remain in the social and economic doldrums in the short term with more covid-19 deaths (only second to the United States) and stunted economic growth.</p> <p class="has-medium-font-size"><strong>Thailand</strong></p> <p class="has-normal-font-size"><em>Covid-19 may be emboldening protesters…</em></p> <p>Thailand is symbolic of the challenges with covid-19 in Asia. Things were under control and then the country attempted to open the borders through controlled tourist zones. But the Delta variant is spreading amongst a population that is less than 10% vaccinated (with two doses) and dependent on the return of tourists. Accelerating vaccinations seems all but impossible at this stage, at least in regards to stemming the current onslaught of health (and economic) pain. The Thai government will continue to support debt relief and focus on all attempts to stimulate local and foreign consumption. But with Asia facing an uphill battle as a region, the country cannot expect much external support (as other Asian countries attend to their internal covid-19 problems) and will mainly hope non-Thais are willing to bear the risk in visiting the country. The latest data suggest that strategy is not working with GDP growth expected to be 0.7%-1.2% this year, which is an approximate 50% reduction from the 1.5%-2.5% predicted in May by the National Economic and Social Development Council. The council blamed the drop in expected GDP growth on the “flareup of the [covid-19] outbreak in April” with no insurance to the public that this would not continue to be a problem. The recent Thai protests are ultimately the epitome of this deteriorating situation with local Thais basically saying they have lost faith in the system, which includes both the monarchy and non-monarchy leadership for Thais.</p> <p class="has-medium-font-size"><strong>India</strong></p> <p class="has-normal-font-size"><em>The lack of protests indicates a significant amount of quiet suffering…</em></p> <p>Covid-19 has been detrimental to the social and economic fabric of India. Yet Prime Minister Narendra Modi has impressively avoided the protests witnessed in the other countries on the list. The country has recorded more than 431,000 cases out of the nearly 30 million people who have contracted the virus. While the country of 1.36 billion people has reported fewer deaths than Brazil and the United States, numerous experts (as well as Modi critics) continue to argue that the positive case numbers and fatality numbers are underreported with data collection quite underwhelming outside a few major cities. The stories from locals suggest that there is some truth to underreporting. That aside, if the physical destruction of life was not too much, the underwhelming economic turnaround leaves many families unable to care for the sick and the healthy. At the start of the year, IMF expected the country to grow by more than 12% this year, but recently reduced that estimation to 9.5%. Early consumer spending data and a spike in the Delta variant in the country suggests that this number may decrease again. In a country where many individuals live on daily wages, these slowdowns (and shutdowns) ultimately reverse Indian gains against poverty, according to the World Bank, with the effects on human life lingering for a generation. Prime Minister Modi recently renewed his pledge to spend more than $1 trillion on infrastructure to boost the economy and create jobs. The pledge is an effort to allay concerns that covid-19 is becoming the perfect storm of a health and economic crisis for India, particularly amongst the most vulnerable in the population. Sadly, if the current rate of economic pain persists, the gains of the 2010s against poverty may be wiped out by the pandemic despite the country having an ability to internally produce the vaccine.</p> <hr class="wp-block-separator"/> <p></p> ]]></content:encoded> </item> <item> <title>Lebanon’s Search For A Solution in 2021</title> <link>https://kurtdavisjr.com/lebanons-tragedy-economy-politics-covid-19-solution/?utm_source=rss&utm_medium=rss&utm_campaign=lebanons-tragedy-economy-politics-covid-19-solution</link> <dc:creator><![CDATA[Kurt L. Davis Jr.]]></dc:creator> <pubDate>Fri, 08 Jan 2021 10:31:25 +0000</pubDate> <category><![CDATA[Middle East / Asia]]></category> <category><![CDATA[2021]]></category> <category><![CDATA[Covid-19]]></category> <category><![CDATA[Economic Recovery]]></category> <category><![CDATA[Israel]]></category> <category><![CDATA[Lebanon]]></category> <category><![CDATA[Politics]]></category> <category><![CDATA[Port Explosion]]></category> <category><![CDATA[Saad Hariri]]></category> <category><![CDATA[Syria]]></category> <guid isPermaLink="false">https://kurtdavisjr.com/?p=396</guid> <description><![CDATA[Lebanon has long swept its challenges under the rug and celebrated its successes. But the explosion back on August 4th in the port area of Beirut—the capital of Lebanon—, in a figurative and physical sense, unveiled a tomb of hidden treasures and misfortunes of years past. Yet the tragedy of the blast was it not only took so many lives, but its revelations of treasures and misfortunes were not exactly new...]]></description> <content:encoded><![CDATA[ <div class="wp-block-image is-style-default"><figure class="aligncenter size-large is-resized"><img loading="lazy" decoding="async" src="https://kurtdavisjr.com/wp-content/uploads/2021/01/Lebanon-FT.jpg" alt="" class="wp-image-398" width="580" height="326" srcset="https://kurtdavisjr.com/wp-content/uploads/2021/01/Lebanon-FT.jpg 700w, https://kurtdavisjr.com/wp-content/uploads/2021/01/Lebanon-FT-300x169.jpg 300w" sizes="auto, (max-width: 580px) 100vw, 580px" /><figcaption> (Photo Credit: Hamzeh/EPA/Shutterstock)</figcaption></figure></div> <hr class="wp-block-separator"/> <h4 class="has-text-align-center wp-block-heading"><strong><em>Dispersing with the political and economic remnants of civil war</em>…</strong></h4> <hr class="wp-block-separator"/> <div style="height:20px" aria-hidden="true" class="wp-block-spacer"></div> <p>This is not Lebanon. This is Lebanon. Maybe both statements are true.</p> <p>The hope, the destruction, and the hope again…or is it the destruction, the hope, and the destruction again?</p> <p>Lebanon has long swept its challenges under the rug and celebrated its successes. But the explosion back on August 4<sup>th</sup> in the port area of Beirut—the capital of Lebanon—, in a figurative and physical sense, unveiled a tomb of hidden treasures and misfortunes of years past. Yet the tragedy of the blast was it not only took so many lives, but its revelations of treasures and misfortunes were not exactly new.</p> <p>The treasures of Lebanon are its people and culture, and the resilience that keeps the people and culture fastened together. It is hard not to know these treasures or hear about them if you are to know Lebanon and have Lebanese friends. The fears are also known—political induration, economic and financial crisis, and the unavoidable foreign influence—yet they are danced around and skipped over in many conversations. Thus, the mystery of the entire situation is how does anyone, after the explosion, pretend the treasures easily outweigh the misfortunes (especially as the people continue to exit for other countries).</p> <p>More than four months later, the Lebanese diaspora has returned home for the holiday season to find a country still searching for a new way. Many visiting Lebanese diaspora are young(er), employed and idealistic, looking out at a local public that is increasingly old(er), unemployed, and decreasingly optimistic. This is not how their parents described Lebanon in its past days. The stories of today describe a grim reality on the ground…thus what is to be changed in the country if the stories are to resemble the past optimism of their parents’ tales.</p> <p class="has-medium-font-size"><strong>A Civil War Chameleon</strong><strong></strong></p> <p class="has-normal-font-size"><em>The Civil War That Never Ended But Adjusted</em></p> <p>More than 45 years ago, in April 1975, the Lebanese civil war broke out. The war lasted 15 years, taking more than 150,000 lives, injuring more than 300,000, and leading to the mass emigration of Lebanese. The end of the war was equally catastrophic with both Israel and Syria making best efforts to control the country. A series of political assassinations and the continuous picking at old political scabs fueled further instability in the country. It was the assassination of former Lebanese Prime Minister Rafiq Hariri on Valentine’s Day in 2005 by a suicide truck bomb in Beirut that ultimately made Syria quit its occupation of the country. A senior member of Hezbollah was convicted for the planning of the assassination by an UN-funded special tribunal in the Hague back in July last year. A new war with Israel would erupt in 2006…for many Lebanese (and Israelis), this was only a continuation of the strained relationship that has soiled regional peace efforts for decades. The uprising in Syria in 2011 further picked at old wounds as Syrian refugees flooded into Lebanon for safety.</p> <p>Elections and protest movements are equally both synonymous with Lebanese politics and can function as a never-ending extension of the Lebanese civil war. The country existed without a president for about 29 months until October 31, 2016 when the Lebanese Parliament elected Michel Aoun after 40 failed attempts to fill the post. Various political parties undermined previous efforts to fill the vacancy with boycotts that prevented the necessary quorum for a vote. Following the 2016 election, President Aoun reappointed Saad Hariri as prime minister. Hariri previously served as prime minister from 2009 to 2011. He would unexpectedly resign on November 4, 2017 in a televised statement from Saud Arabia with unabated references to Iran and Hezbollah’s interference and influence in the greater Middle East politics and fears of assassination. </p> <p>Then Hariri, after a series of maneuvers and failed attempts to leave Saudi Arabia, would find his way to France to meet French President Emmanuel Macron and then back to Beirut where he suspended his resignation on November 21<sup>st</sup> and fully rescinded it on December 5<sup>th</sup>. Hariri would later announce another resignation in October 2019 following a series of street protests by the Lebanese public against a lack of transparency and accountability in government. He would leave office when Hassan Diab, the former education minister, was appointed to prime minister on January 21, 2020 and then be reappointed as prime minister on October 22<sup>nd</sup> after Diab resigned following the aforementioned explosion at the port. </p> <p>Lastly, the most recent parliamentary elections due for 2013 did not happen until May 2018 with the March 8<sup>th</sup> coalition, a coalition of political parties and independents united by a pro-Syria stance and allied with Hezbollah, taking a majority share of the power. The March 8 Alliance and the March 14 Alliance—a coalition of political parties and independents united by an anti-Syria stance—both formed in 2005 are manifestations of the ongoing alliances from the civil war codified into contemporary Lebanese politics.</p> <p class="has-medium-font-size"><strong>The “Slicing the Cake” Nature of Lebanese Politics</strong><strong></strong></p> <p class="has-normal-font-size"><em>Political Power Sharing and Patronage</em></p> <p>So many in Lebanon grew up being told that Lebanon’s political system was necessary to protect the country. The UN-brokered Taif Agreement and related agreements following the end of the civil war was explicit in terms with a pre-assigned number of seats in the Lebanese Parliament to each of the different religious groups and sects. Unsurprisingly, political parties have been designed around these groups to ensure political power and mobilize voting blocks. Thus, although more religiously diverse than its Middle Eastern neighbors as well as having a very sizeable Christian population, Lebanon cannot escape the very palpable Sunni-Shia sectarian divide that permeates the politics of other predominantly Muslim nations in the region. </p> <p>Furthermore, the selection of candidates and subsequent voting is filtered through the same religious lens. Candidates are generally selected along religious fidelity with repeat selection of candidates for parliament by elder Lebanese which generally frustrates young Lebanese. The patronage system for cabinet posts, jobs and so on consequently remain dominated by specific families. Voters, especially younger voters, complain about the results, but the rules generally ensure the same outcome or, at least, prevents things from changing. The “system” also finds strength through continued emigration of talented Lebanese, who, in a figurative sense, are invited to send and spend money in Lebanon to support a fragile economic state but should stay out of politics. As a result, the protestors on the street are increasingly younger and mobilized by weakened social services and a troubled economy, ultimately exhibited by the country’s sovereign default last year.</p> <p>The apportionment and later subdividing of the spoils of patronage is a rather limited course of action for reversing the sectarian challenges. In other words, the “slicing the cake” style of politics has created an outwardly image of a functioning political system while mistrust percolates among religious sects and the greater Lebanese population. And, as the economic cake and associated positions of political power shrink, it is increasingly hard to find agreement on how to share responsibility and rewards. The pie is also shrinking as state-owned enterprises labor through economic turmoil caused by both mismanagement and the economic demise of the state. In the past, the state could financially engineer higher returns for investors and citizens willing to lend their dollars to the state. Today, both markets and Lebanese citizens are backing away.</p> <p class="has-medium-font-size"><strong>The IMF is Not a Miracle Worker</strong><strong></strong></p> <p class="has-normal-font-size"><em>The Deeper Problems and Challenges</em></p> <p>Lebanon’s economic challenges are not new. The country has regularly walked a tightrope with its sovereign balance sheet and avoided collapse with some form of financial sticky plaster from Middle Eastern neighbors or the market at the last minute. Yet the sovereign default last year completely exposed the bleeding in the system, with a shortage of foreign currency, an unclear strategy for attracting additional foreign currency, and an unceasing impatience and disdain from the public for the financial system in its entirety. A number of economists inside and outside the country supported the country defaulting on its debt with one common theme underlying their thinking: Lebanon needed to start over from scratch.</p> <p>Now, from “scratch” is hard unless you can blow up the entire system which is complicated for several reasons. First, decades of extracting income from rent-based sectors, including banking, real estate, and remittances to fund imports and consumption has emptied the coffers of the government as well as frustrated that small group still willing to fund the government. International markets have turned off the tap while neighboring countries show some willingness to finance the country only if that money can come with some political fidelity which Lebanon cannot offer within today’s politics. Secondly, the financial sector, in particular the banks, cannot find the usual support from the Lebanese population. Local Lebanese have lost significant wealth and buying power with the plunge of the Lebanese pound to roughly 8,000 to 9,000 pounds per dollar (versus the peg rate of 1,500) and have been hammered economically by covid-19 at home. Lebanese diaspora outside the country struggle to bet on the resilience and recovery of the country and choose to safekeep their money elsewhere across the globe. </p> <p>The IMF accordingly will struggle to employ the normal tactics in its reform toolbox. Currency devaluation… already done. Shrink the public sector…that could work but the local population is already combating inflation near 60% and struggling to pay for basic goods and services. Thus, the stripping of subsidies on energy and gasoline alongside food products ostensibly seems impossible today. Lastly, the focus on fiscal consolidation is not necessarily an easily digestible medicinal pill for a country that requires real economic growth, i.e. beyond infrastructure spending at the government level or inflow of dollar bank deposits from Lebanese both of which are unlikely in the short term in today’s environment</p> <p class="has-medium-font-size"><strong>“Falling on the Sword” to Save the Country</strong><strong></strong></p> <p class="has-normal-font-size"><em>Looking Back at Turkey in the 2000s and De Klerk in the early 1990s</em></p> <p>Lebanon may require the most extreme series of reforms. That said, the likely initiator of such reforms will likely not have long-term political survival. Consider the case of Turkish economic crisis in 2000s. The IMF provided more than $11 billion in loans while the state sold 51% stake of Turkish Airlines with advertisements placed in newspapers to attract buyers. Lebanon will require major loans to fund economic growth as foreign investors—similar to the experience in Turkey in the late 1990s—are reluctant to return to the country today. That said, Turkey became indebted to the IMF and, in the view of some critics, was placed at the mercy of the IMF’s political <em>and </em>social willpower. Additionally, some treasured Turkey state assets were no longer fully owned by the state…privatizing Lebanese state assets is already a delicate subject. </p> <p>Despite all these efforts in Turkey, the ruling party could not prevent the landslide victory of the AKP led by current Turkish President Recep Tayyip Erdoğan in 2002. This point is to say the system may need its F.W. de Klerk reform moment. De Klerk remains a controversial figure in South African history. He was the leader of the Afrikaner ethnic National Party (disbanded in 1997) yet he also later dismantled apartheid with universal suffrage to the South African population. He would win the Nobel Peace Prize for figuratively falling on the sword for the National Party’s historic wrongs and upending the system that maintained its white-minority rule. Lebanese politics may require several De Klerk moments…absent that, a new inflow of foreign capital or sale of state assets may not be enough to calm the angst of the young Lebanese and beyond, especially if an economic recovery only ultimately reinforces the old political system. Every party runs out of cake to eat and share at some point…or better said, a political system that sustains itself solely on perfectly allocating the spoils of war is bound to continuously falter and ultimately fail unless it can evolve and change (the jury is still out on Lebanon).</p> <hr class="wp-block-separator"/> <p></p> ]]></content:encoded> </item> </channel> </rss>