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  • Lebanon Opportunities

    What happens now?

    Dec 06, 2019 6 minutes

    Three scenarios are discussed, and their expected impact predicted. The following suggestions are best guesses rather than results from econometric models. The forecasted figures, while having sound assumptive reasoning, are not based on academically sound methodologies. The objective of this theoretical exercise is to illustrate basic trends and ballpark changes, rather than forecasts to be used in detailed policy making. Obviously, this is a pitch to shatter the current classical economic model.

    Scenario 1

    LIFT BARRIERS AND DO NOTHING

    Restrictions are lifted on the access to bank deposits, and transfers outside the country. The Central Bank will allow breaking the lock-in periods of deposits against hefty penalties such forfeiture of interest earned in addition to a 20 percent discount on principal.

    IMMEDIATE IMPACT

    Banks and the Central Bank will lose a sizable part of their liquidity. Citizens and businesses will keep their cash hoards, and will increase them by whatever the withdrawals allow. Around $1 billion will be transferred outside the

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