Household spending
to resume fragile growth

First recovery since 2017 driven by

remittances, safety net and ration programs

Household spending is projected to recover this year for the first time since 2017, according to the ‘Lebanon Consumer and Retail Report’ of Fitch Solutions. Real household spending is expected to grow by two percent in 2022 after an estimated contraction of 12 percent in 2021 and 17.5 percent in 2020.

“Fragile consumer spending growth will be supported by the introduction of a ration card program, the Emergency Social Safety Net Project, as well as solid remittance inflows as more Lebanese move abroad due to worsening economic and social conditions in the country,” said Fitch Solutions, the research arm of Fitch Group which includes the international credit rating agency Fitch Ratings.

Growth in consumer spending is likely to remain weak as consumer price inflation will edge even higher in 2022. “[Consumer price inflation] is forecast to average 167 percent, due to a sustained depreciation of the currency on the parallel market and the removal of subsidies on essential products, both weighing on the spending power of Lebanese consumers,” Fitch Solutions said.

It said in its ‘Lebanon Ten-Year Forecast’ issued in November 2021: “With remittances accounting for around 20 percent of GDP, the Lebanese expatriate community will be a crucial source of external capital and will help to buoy household spending. We expect that the weakening of the currency in 2021 will significantly boost the value of remittances, increasing the degree to which they can help to boost consumers’ incomes.”

The increase in remittance inflows is also generated by rising emigration, especially of citizens with a tertiary education. “Not only does the loss of critical skills associated with this brain drain weaken the economy's growth potential, but it highlights a fundamental lack of confidence in the country's long-term prospects,” Fitch Solutions said in the ‘Lebanon Ten-Year Forecast’.