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Migrantonomics 301 

The macroeconomic vectors

by Thomas Schellen

The examples from Migrantonomics 201 are just seeking to illustrate the pointlessness of uneconomic rants where combative but uncertain data, meaning data referenced without clear identification of their sources and research methodologies, have been put forth heavily in recent argumentation against the continued presence of displaced Syrians in Lebanon. 

Whether one considers these combative data to be politicized or not, the main problem is not that such data are used as tools in debates without the fact checking that should be undertaken by media and decision makers that quote them. The bigger problem is the existence of multiple barriers preventing the compilation of timely and verifiable data that are needed to both develop economic solutions and create trust so that the insights the data provide are actually translated into actionable concepts and projects of adequate scale. 

It is self-explanatory that the actual costs of sheltering displaced people in Lebanon has to be assessed accurately not only for the purpose of requesting more and better-targeted burden sharing from the international partners but also for developing salient and actionable economic projects out of local initiative. 

For being useful in economic planning in Lebanese attempts of rebuilding the nation, however, the problem of even approximately assessing the costs of the refugee crisis is made extra difficult by at least five barriers, the first three of which informed or created the other two: 

  1. The lack of data
  2. Long-standing distortive impact of Lebanese policies and politics 
  3. Changes in the economy and hosting cost equation over the past 13 years
  4. Contradictions of refugee policies and rhetoric versus de-facto reliance on cheap Syrian labor
  5. The need to account for the refugee economy holistically, which requires tabulation of positive and negative economic impacts, not just assumed headline cost factors.

The complex domestic risk matrix beneath Lebanon’s refugee crisis

1) Deficient data

The lack of data is endemic to Lebanon and extends from basic population and census data to data on migrant labor and displaced Syrians. As far as state capacity, the lack of data is broadly reflected in tax compliance gaps and economic informality (all informal employment in Lebanon has recently been estimated by the World Bank at 65 percent in 2022/23, up from 52 percent for 2018/19). Furthermore, it sabotages macroeconomic planning. In the specificity of the displacement crisis, economic modeling of refugee impacts on the economy is unreliable in absence of basic data.

2) Ill-advised policies   

State interventions into markets and untargeted provision of subsidies have not been able to improve social equity and social mobility. Economic effects of subsidies on fuel and electricity ranged from support of wasteful behaviors to non-adoption of advanced technologies.

Data on migrant labor and interconnections of Syrian and Lebanese economies was not researched to the required depth if initial survey numbers were politically undesirable. As inflows of refugees surged, their tapping into subsidies was heavily criticized but the real culprits were the underlying policies.

3) Disruptions of the economy

Numerous disruptive events impacted the Lebanese economy. In the buildup phase of the crisis period of the 2010s, internal Syrian warfare was a cause of reduced Lebanese GDP growth and underperformance versus economic potential. This detrimental impact was in public perceptions soon overshadowed by the Syrian refugee inflows.

But as economist Khalil Gebara maintains, Syria’s internal warfare and involvement of Hezbollah therein continued to have negative impacts on Lebanon GDP beyond the abatement of fighting in Syria.

Homegrown political crises – parliamentary and presidential vacuums – eroded governmental maneuverability and popular trust in the state. The state’s ability to respond to economic challenges with reforms and policy innovation was further weakened. Geopolitical and regional turbulences and international financial shifts in mid 2010s affected Lebanon and piled further risks on the already risky unconventional finance measures that Banque du Liban undertook in 2016.  

From autumn of 2019, as the liquidity crisis triggered destruction of financial trust and currency values, the systemic meltdown of the economy impacted the country in ways that are incomparably more severe than the Syrian displacement crisis. It seems unclear how the depreciation of the Lebanese currency changed the cost of hosting refugees in hard-currency terms or how much the international donor funding of Syrian refugee needs contributed to the sustenance of Lebanon between 2020 and 2022. 

How to quantify the role of the displacement crisis in its positive and negative impacts on the Lebanese economy when comparing the four years of 2020 to 2023 with 2015 to 2018? “That is a great question. All I can tell you is that the cost of the financial crisis is much higher than the cost of the whole displacement,” says Gebara. 

Look: a strategic economic solution

Syrian refugees, who were granted humanitarian visas by the Italian government gather at the departures hall in Beirut’s International airport on March 1, 2017 ahead of their flight to Rome. – Under an initiative introduced last year by the Italian government, nearly 700 Syrian refugees have been granted one-year humanitarian visas to start their asylum process in Italy. The programme is the first of its kind in Europe: a speedy third way that both avoids the United Nations’ tedious resettlement process and provides refugees with a safe alternative to crammed dinghies to reach Europe (Photo by JOSEPH EID / AFP)

Separating fake and useless numbers from those that can be leveraged into salient economic planning is a mission that this dip into the material cannot attempt. Against the missing strategic approach to improving the economics of the Lebanese crisis situation, one remedial action is to accept that the numbers on international support deserve to be examined from multiple sectoral angles and under consideration of aggregate demand. Even – or especially – if they are not in support of the hitherto practiced refugee economics and established narrative.

Instructively for the Syrian displacement and refugee debate, a new World Bank poverty survey notes that growing involvement of Lebanese workers with low-skilled jobs in the economic meltdown was “partly due to a shrinking pool of better-paying skilled jobs” but notably did not reflect the demographic surge due to arrivals of Syrian refugees. “Segmented labor markets for the most part, mitigated the impact of this demographic surge on labor market outcomes for the Lebanese,” the survey report and press statement mentions in passing. 


Corresponding to the survey findings that labor market participation rates by Lebanese citizens weren not impacted negatively by the influx of Syrian refugees in the 2010s but only by the Lebanese economic meltdown after 2019, a research report by three Lebanese and one Oxford-based academic did not detect a direct impact of refugees on GDP. 

The report, issued in September 2021 by London-based NGO World Refugee & Migration Council (WRMC), concludes that “the arrival of refugees has placed pressure on infrastructure, housing prices (in some areas) and livelihoods. However, at the macro level, the economy’s downturn is not caused by the arrival of the refugees.”

Using a vector auto-regressive (VAR) statistical analysis model, the WRMC researchers gauged impacts of Syrian refugee numbers on key economic indicators, namely  growth, labor markets, imports, exports, inflation, received funding, and electricity generation. Detecting no causal relations between refugee numbers and examined economic variables (testing for what is known as Granger causality), the results of their scientific research “affirm that no relationship exists between the number of refugees and the growth of the Lebanese economy,” the academics say. They add that this finding, while the exact opposite of widely held perceptions, is reinforced by the fact that the country’s economic performance was problem-ridden and generally performing below potential already in the two decades before the arrival of Syrian refugees.    

Earlier research by UNDP explains that during the refugee crisis’ first phase, aid inflow generated benefits at a multiplier of 1.6 for every dollar provided, with 14 percent of aid being expended on salaries and the like to local agency staff and other funding contributing to sectors such as retail, housing, and pharmaceuticals. Notably, the UNDP report, published in 2015, never was followed up with a second part announced at the time. 

All this material supports the idea that for an economic solution, Lebanon’s inflows of international aid deserve examination in relation to the national financial commitments and development of productivity in the refugee economy that have been undertaken by the country’s public and private stakeholders. 

While the burdens to the country, such as direct costs to stressed infrastructures and environmental damages, are undeniable, the total amount of aid that entered Lebanon – and consequently its economy, irrespective of the status and identity of aid recipients – between 2011 and 2022 is cited as $12.39 billion in the Lebanon Crisis Response Plan (LCRP) of 2023. The timeline of aid grants shows that, after initially low funding asks and inflows in 2011 and 12, annual flows of donor funds for the next ten years of 2013 to 22 ranged between $1 and 1.45 billion annually.  

Given such funding levels since 2011, actual coverage of the cost of hosting DPs in Lebanon can be broadly estimated at 80 percent “over the past years,” Khalil Gebara, professor of economics at the Lebanese American University, writes in a recent position paper. 

He calculated this ratio on basis of numbers published in the LCRP. “You see [in the LCRP] what donors are spending their money on. You see that they are covering all of the human issues of Syrian refugees like food and shelter and protection. What you do not see covered are expenses related to infrastructure, which leaves things such as electricity and water. That is how I reached the conclusion,” Gebara tells Executive. 

Both Gebara and education expert Carlos Naffah, who likewise recently authored a position paper on the Syrian displaced persons crisis in Lebanon, refer to media reports that put the annual cost of hosting the displaced at between almost $1.5 and $1.7 billion. 

The primary sources of the cited annual cost range are said to be within a yet to be released World Bank paper and several media reports quoted Ferid Belhaj, World Bank Vice President for Middle East and North Africa, for the $1.5 billion cost assessment. The number may be deserving further investigation (let’s not talk about the IMF’s 2016 Article IV staff report here) but appears as a much more plausible one when compared with alleged refugee hosting costs to Lebanon that amounted to more than $50 billion over 13 years. 

As a working hypothesis, it seems reasonable to insist on increased burden sharing after having compiled macroeconomic insights into the local refugee and migrant economies into a actionable plan that combines international financial inflows – which Lebanon has unrivaled expertise on – with programs of expense rationalization and better cost efficiencies, in addition to fostering the activation of new economic opportunities created by the demands of safely more than one million people, including 350,000 children under 12. Call it advanced migrantonomics. 

To repeat: correlating the need for a macroeconomic solution for Lebanon’s economic challenges that includes a sustainable answer to the displaced persons problem with the need for a regional refugee solution and a economic answer to the nexus of politico-humanitarian economics, self-interested and exploitative migrant economics, and minimal-sustenance refugee economics, that is challenging decision makers and economic strategies in all parts of the world, suggests that solutions for this global challenge can be studied in in Lebanon.

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Thomas Schellen

Thomas Schellen is Executive's editor-at-large. He has been reporting on Middle Eastern business and economy for over 20 years. Send mail
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