The Ukraine conflict had a significant ripple effect on economies around the world, driving a spike in commodity prices in the months following the invasion and exacerbating existing economic challenges in the wake of the Covid-19 pandemic. The impact of commodity price hikes in the wake of the conflict has been well documented, as has the relative rebound since. This unexpected rebound in global prices has drawn some to conclude that the impact of the Ukraine conflict was short term and less severe than initially expected. While true to some extent, understanding the full impact of the conflict requires a more nuanced analysis.
One year after the initial invasion, it is possible to examine the many ways in which the Ukraine conflict has affected Lebanon, a country which was already contending with – and continues to face – complex and multilayered crises. Lebanon is profoundly vulnerable to the broader impact that the Ukraine conflict has had on commodity prices, as well as losing access to proximately located markets upon which it was previously dependent.
The events, data, and factors described in this paper suggest that pre-existing deficiencies in Lebanon’s import-dependent economy were a key factor driving up costs in Lebanon in 2022, as well as its vulnerability to factors linked to the Ukraine conflict. This is especially the case regarding fuel. Moreover, the commodity price “rebound” in no way addresses these deficiencies and market forces did not spur fundamental changes in Lebanon’s productive economy – toward more efficient and sustainable practices – leaving it highly vulnerable to future commodity price shocks.
The Ukraine conflict exacerbated ongoing challenges facing Lebanon’s beleaguered manufacturing sector, compounding the effects of financial, economic, and political crises and external factors such as the global supply chain supply crunch following the COVID-19 pandemic and global inflation. The range of KIIs conducted in the production of this report make clear that the negative impacts of the Ukraine conflict on Lebanese manufacturing have been pervasive, and interact with and exacerbate the complex set of additional challenges already being faced in the context of Lebanon’s other crises.
By Crisis Analytics Team, Mercy Corps Lebanon
