GDP at half potential due
to confessional governance

World Bank saw moderate
growth over the last two decades

The Gross Domestic Product (GDP) would have been at more than $100 billion instead of its current standing at $50 billion, if the country was not, during the last 25 years, under a confessional system, according to the World Bank.

The World Bank’s report, ‘Promoting Poverty Reduction and Shared Prosperity’, published this month, estimated the cost of confessional governance per year at nine percent of the GDP, since the end of the Civil War.

GDP was estimated at $3 billion in the beginning of the 1990s, which means that with the current estimated annual loss due to confessional governance, the GDP would have grown by two to three times, stated the report.

Illegal activities are not punished by the State, when involving politically/confessionally connected and/or wealthy actors, which exacerbates elite capture and the pervasive patronage system, the report said. In addition, the report claimed that influence of economic stakeholders and personal connections or corruption by ‘ pulling strings’ are more likely to influence policy execution and enforcement of the rule of law.

Confessional governance as well as conflict and violence, stemming, in part, from the broader dynamics of the conflict in the Middle East, are main constraints imposing a heavy burden on the economy, the report said.

“These two factors are pushing the economy to grow below its potential,” said Wissam Harake, Economist at the World Bank-Lebanon. The recent Syrian conflict is estimated to have cost the economy $7.5 billion in foregone output and widened the fiscal deficit by $2.6 billion through 2014. Growth is estimated to drop by 2.9 percentage points in each conflict year.

Real GDP grew on average by an estimated 4.4 percent from 1992 to 2014. “Although growth has been moderate over the last two decades, we cannot ignore the economy’s resilience to different shocks,” said Harake.

Several opportunities could materially improve development prospects, the report said. “This includes among many recommendations to reduce macro-fiscal vulnerabilities; improve governance and effectiveness of public institutions, address energy gaps to increase productivity of the private sector and reduce the macrofiscal burden, strengthen ICT, and modernize the education sector,” said Harake.