Job losses and pay cuts as Lebanon’s economy crumbles

Lebanese protesters gather outside a Ministry of Finance department. Growth in Lebanon has been battered by years of stubborn political deadlock. (AFP)
Updated 29 November 2019

Job losses and pay cuts as Lebanon’s economy crumbles

  • After years of political turmoil, the Lebanese economy is in a sharp downturn, banks have restricted access to dollars while prices have risen

BEIRUT: Weeks into a protest movement partly driven by a collapsing economy, Lebanese interior architect Laeticia Nicolas was called in by her boss and told she was fired.

“There had been fewer and fewer projects for a year,” said the 28-year-old, who since Oct. 17 has taken part in anti-government protests sweeping the country.

“Before the revolution began, they warned us they would be paying just half our salaries in exchange for reducing working hours,” she said.

But as the protests gained momentum, he downsized his team. Nicolas was informed of the bad news at the end of the month when she received her salary.

“It’s not because of the revolution, but it may well have accelerated things,” she said.

After years of political turmoil, the Lebanese economy is in a sharp downturn, banks have restricted access to dollars while prices have risen.

Amid the crisis, thousands of Lebanese say their jobs are at risk.

Activists have denounced what they call illegal lay-offs and urged the labour ministry to intervene.

Some people, like Nicolas, have lost their jobs altogether, while others have been told to work part-time for a fraction of their original salary.

Economic growth in Lebanon has been battered by repeated political deadlock in recent years, compounded by the eight-year war in neighbouring Syria.

Successive cabinets have failed to implement desperately needed reforms to redress a floundering economy heavily reliant on tourism and services.

The World Bank projected negative growth of 0.2 percent in Lebanon for 2019, but now warns the recession could be even worse.

It has urged that a new cabinet be swiftly formed, after the government stepped down less than two weeks into the protests, to avoid more Lebanese becoming poor.

Around a third of Lebanese live in poverty, and that figure could soon rise to half, according to the World Bank.

Unemployment, already above 30 percent for young people, would also go up, it said.

A group of Lebanese banks and private businesses also warned of bleak times ahead.

“Thousands of companies are threatened with closure, and tens of thousands of employees and workers risk losing their jobs,” they said.

The union of restaurant and bar owners has said 265 establishments have closed already, and that figure could reach 465 by the end of the year.

In the month before the protests, banks began restricting access to dollars, sparking a greenback liquidity crisis.

Bilal Dandashli, who heads a small road safety equipment company he founded in the 1990s, said he was struggling. “We can no longer import supplies from abroad,” he said.

The Lebanese pound is pegged at around 1,500 pounds to the dollar, and both are used interchangeably in everyday transactions. But caps on dollar withdrawals have forced people to resort to moneychangers, sending the unofficial exchange rate soaring to more than 2,200.

To make matters worse, Dandashli said customers were also not paying their debts. “It’s like begging for our own money,” he said.

$8bn blow to Erdogan as investors flee Turkey

Updated 09 July 2020

$8bn blow to Erdogan as investors flee Turkey

  • Overseas holdings in Istanbul stock exchange are at lowest in 16 years

ANKARA: Foreign capital is flooding out of Turkey in a massive vote of no confidence in President Recep Tayyip Erdogan’s economic competence.
Overseas investors have withdrawn nearly $8 billion from Turkish stocks since January, according to Central Bank statistics, reducing foreign investment in the Istanbul stock exchange from $32.3 billion to $24.4 billion.
As recently as 2013, the figure was $82 billion, and foreign investors now own less than 50 percent of stocks for the first time in 16 years.
“Foreign investment has left Turkey for several reasons, both internal and external,” Win Thin, global head of currency strategy at Brown Brothers Harriman, told Arab News.
“Externally, investors fled riskier assets like emerging markets during the height of the coronavirus pandemic. Some of those flows are returning, but investors are being much more discerning and Turkey does not seem so attractive.”
In terms of internal factors, Thin said that Turkish policymakers had made it hard for foreign investors to transact in Turkey. “This includes real money clients, not just speculative.
“By implementing ad hoc measures to try and limit speculative activity, Turkey has made it hard for real money as well. Besides these problems, Turkey’s fundamentals remain poor compared to much of the emerging markets.”
Erdogan allies claim international players are manipulating the Istanbul stock exchange through automated trading, and have demanded action to make it difficult for them to trade in Turkish assets.
Goldman Sachs, JPMorgan, Merrill Lynch, Barclays and Credit Suisse were banned this month from short-selling stocks for up to three months, and this year local lenders were briefly banned by the banking regulator from trading in Turkish lira with Citigroup, BNP Paribas and UBS
JPMorgan was investigated by Turkish authorities last year after the bank published a report that advised its clients to short sell the Turkish lira.
MSCI, the provider of research-based indexes and analytics, warned last month that it may relegate Turkey from emerging market status to frontier-market status because of bans on short selling and stock lending.
With the market becoming less transparent, overseas fund managers, especially with short-term portfolios, are unenthusiastic about the Turkish market and are becoming more concerned about any forthcoming introduction of other liquidity restrictions.
The exodus of foreign capital is likely to undermine Turkey’s drive for economic growth, especially during the coronavirus pandemic when employment and investment levels have gone down, with the Turkish lira facing serious volatility.