Introduction

Introduction

By now it is no surprise that the COVID-19 pandemic and its ensuing confinement policies have wreaked havoc in world economies. While some countries had the fiscal and economic resources to lessen the impact of the pandemic, lessening its severe consequences on their population, other countries were in an acutely fragile position even before the pandemic struck, leaving them particularly vulnerable to its ramifications. Lebanon is one of the countries in which COVID-19 compounded already severe economic, financial, and political crises.

By the end of 2019, Lebanon had plunged into crisis—marked by currency and banking crises, increasing unemployment, and soaring levels of inflation—which was brought about by a drop in capital inflows and poor governance. It had been running a current account deficit since the early 2000s, and the net negative foreign currency position of the balance sheets of the sovereign, the central bank, and the commercial banks stood at 90 percent of GDP at end-2019 (Moubayed and Zouein 2020). Further, the debt-to-GDP ratio is estimated at around 187 percent for 2020, up from 171 percent in 2019, and unemployment is at 40 percent (World Bank 2021). In tandem, the government had resigned following the broad-based demonstrations of October 2019, and a new government, formed in January 2020, had defaulted on its debt obligations in March 2020. These conditions, together with the pandemic, saw the currency’s value plummet and a parallel exchange market established.

Within Lebanon, Syrian refugees had been grappling with poor living conditions since their arrival after the onset of the 2011 Syrian war. Lebanon hosts an estimated 1.5 million Syrian refugees out of its nearly 7 million population, making it the nation with the highest number of refugees per capita in the world. Although this situation reflects the remarkable generosity of the Lebanese people, it has also led to tensions between the host community and the refugees, who tend to live mostly in cities and villages, and in some cases in informal settlements, because of the government’s decision to establish refugee camps (UNDP and ARK 2019).

The following describe the deplorable living conditions of these refugees:

• As of 2020, the Vulnerability Assessment of Syrian Refugees conducted by the United Nations High Commissioner for Refugees (UNHCR),

United Nations Children’s Fund (UNICEF), and World Food

Programme (WFP) indicated that refugees live in conditions that do not meet humanitarian standards, such as overcrowding and dangerous shelter conditions.

• Over half of these refugees suffer from poor food consumption levels, and 88 percent of them cannot afford the Survival Minimum

Expenditure Basket, compared with 55 percent at end-2019 (Hohfeld et al. 2020).

• Among refugee children, most students did not attend school in 2020, including remotely, and the primary and preprimary attendance rates stood at 16 percent in 2020, similar to that in 2019.

Moreover, an explosion in the Port of Beirut in August 2020 rocked the city, leaving more than 200 people dead, causing rampant damage, and displacing as many as 300,000 individuals (WHO 2020). Despite the concentration of the material damage in Beirut, the economic impact of the explosion was felt throughout the country, given the Port of Beirut’s position as the main point of entry and exit of traded goods, the small and open nature of the economy, and the demographic and economic concentration in the capital (World Bank 2020a). The damages in housing and culture sectors, which touched the lives of both affluent and poorer neighborhoods of the city, are estimated at US$3.8–4.6 billion, with losses in economic flows estimated at US$2.9–3.5 billion. The government of Lebanon resigned soon after the explosion and continues in its caretaker capacity to this date,1 amid a political deadlock.

How will the pandemic, compounded by preexisting crises, affect both the Lebanese and refugee populations’ poverty levels? To answer that, we conducted an analysis that estimates the changes in poverty since the onset of COVID-19 in Lebanon, and explores the inequalities that the shocks may have propagated among Syrian refugee and host communities. It considers the two crises together, because of their entangled nature, without attempting to identify the impact of each one separately. Understanding the magnitude of the impact of these crises, including that of COVID-19, has implications for the policies that governments and international organizations may need to adopt as the pandemic unfolds and during the recovery period.

In light of the restrictions in collecting face-to-face data from households, the lack of existing data (the most recent welfare survey fielded by the Central Administration of Statistics dates from 2012), and limited ability of phone surveys to measure household consumption and poverty, this study uses a microsimulation model to project the changes in household welfare after the onset of COVID-19. It analyzes the baseline poverty and labor market characteristics of host and refugee households and simulates the effects of the macroeconomic sectoral trends and forecasts on these characteristics. To do that, the study relies on a unique survey that is comparable between refugees and host communities, combined