2021 Index of Economic Freedom

Lebanon

OVERALL SCORE51.4
WORLD RANK154
Rule of Law

Property Rights42.3

Judicial Effectiveness33.1

Government Integrity27.9

Government Size

Tax Burden88.5

Government Spending70.3

Fiscal Health0.0

Regulatory Efficiency

Business Freedom44.3

Labor Freedom47.4

Monetary Freedom78.3

Open Markets

Trade Freedom74.4

Investment Freedom60.0

Financial Freedom50.0

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Quick Facts
  • Population:
    • 6.9 million
  • GDP (PPP):
    • $84.3 billion
    • -6.5% growth
    • -1.2% 5-year compound annual growth
    • $15,327 per capita
  • Unemployment:
    • 6.2%
  • Inflation (CPI):
    • 2.9%
  • FDI Inflow:
    • $2.1 billion

Lebanon’s economic freedom score is 51.4, making its economy the 154th freest in the 2021 Index. Its overall score has decreased by 0.3 point, primarily because of a decline in trade freedom. Lebanon is ranked 12th among 14 countries in the Middle East and North Africa region, and its overall score is below the regional and world averages.

The Lebanese economy is rated mostly unfree for the ninth year in a row. Lebanon’s already feeble political institutions were further weakened in 2020. They have been unable to address the deep structural issues that severely compromise the rule of law and have blocked improvements in fiscal management. Without fundamental reforms, economic freedom in Lebanon cannot move forward.

IMPACT OF COVID-19: As of December 1, 2020, 1,033 deaths had been attributed to the pandemic in Lebanon, and the economy was forecast to contract by 25.0 percent for the year.

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Background

A once-prosperous leading regional center for finance and trade, Lebanon has been severely damaged in recent decades by political turmoil. Since 1975, the country has been destabilized by civil war, Syrian occupation, and clashes between Israel and Hezbollah, the Iran-backed Shia Islamist movement. Syria’s army withdrew in 2005 after its government was implicated in the assassination of Lebanese Prime Minister Rafiq al-Hariri. Sectarian tensions have hindered political cooperation. Elections in 2018 left Hezbollah’s coalition with a majority of parliamentary seats and Prime Minister Saad al-Hariri’s Sunni-dominated Future Movement party with substantial losses. Hariri’s resignation in October 2019 led to the appointment of Hassan Diab as prime minister. Diab resigned in August 2020 following the Beirut port explosion, bringing Hariri back to power.

Rule of LawView Methodology

Property Rights 42.3 Create a Graph using this measurement

Judicial Effectiveness 33.1 Create a Graph using this measurement

Government Integrity 27.9 Create a Graph using this measurement

The law protects real private property, but political instability has weakened enforcement. Land grabs by powerful groups can occur with impunity. The nominally independent judiciary is susceptible to political pressures. The courts are ineffective and struggle to enforce judgments. Corruption is reportedly pervasive in government contracts (primarily in procurement and public works) as well as taxation, elections, judicial rulings, and real estate registration.

Government SizeView Methodology

The top individual income tax rate has been increased to 25 percent, and the top corporate tax rate is 17 percent. The overall tax burden equals 15.3 percent of total domestic income. Government spending has amounted to 31.5 percent of total output (GDP) over the past three years, and budget deficits have averaged 10.2 percent of GDP. Public debt is equivalent to 179.8 percent of GDP.

Regulatory EfficiencyView Methodology

The costs involved in starting a business and dealing with construction permits have increased, and the recovery rate when resolving insolvency is now lower. The 1946 labor law limits the workweek to 48 hours but does not apply to agricultural and domestic workers. Inflation has spiked sharply in recent months. The government has worked to improve the targeting of electricity subsidies.

Open MarketsView Methodology

Lebanon has three preferential trade agreements in force. The trade-weighted average tariff rate is 5.3 percent, but poor regulatory systems discourage dynamic trade and investment flows. Lebanon is not a member of the World Trade Organization. Lebanon’s financial sector used to be a regional hub, but ongoing political insecurity has subjected it to a high degree of uncertainty and strain.

Country's Score Over Time

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Regional Ranking

RANK COUNTRY OVERALL CHANGE
1United Arab Emirates76.90.7
2Israel73.8-0.2
3Qatar72-0.3
4Bahrain69.93.6
5Saudi Arabia663.6
6Jordan64.6-1.4
7Oman64.61.0
8Kuwait64.10.9
9Morocco63.30.0
10Tunisia56.60.8
11Egypt55.71.7
12Lebanon51.4-0.3
13Algeria49.72.8
14Iran47.2-2.0


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