Since October 2019, Lebanon’s economy has entered a prolonged economic downturn, marked by a severe financial crisis, a collapse of infrastructure services, and a crippling political deadlock. In 2020 alone, Lebanon’s real GDP shrunk by 20.3%, while inflation averaged 84.3% in the same year.
The Konrad-Adenauer-Stiftung and Arabnet have worked on a detailed Lebanese Innovation Economy report titled ‘Braving the Storm: Safeguarding the Lebanese Innovation Economy’ to assess the impact of the Lebanese crisis on the startup ecosystem.
The report offers a critical assessment of the impact of the crises across five key dimensions: talent, access to capital, access to markets, infrastructure and operations, government and regulation.
Key Highlights:
The crisis has accelerated talent exodus, leading to a considerable shortage of technology-related skills as well as the creation of an experience gap: a depletion of trained workers who are replaced by inexperienced new entrants.
The degradation of the Lebanese infrastructure has had an overwhelming effect on local startups: A vast majority of the surveyed startups (91.3%) confirmed that the decline in the quality of infrastructure had in fact affected their productivity; 37% of the startups reported missing targets.
Uncertainty around startups’ ability to overcome infrastructure challenges and meet demand has pushed many of them to relocate their businesses and 54.3% of startups have moved at least part of their operations abroad.
The political deadlock created an extremely risky investment environment, particularly for foreign investors. The failure to officially determine the size and distribution of the losses of the financial sector is keeping banks from resuming operations, particularly lending. All of this has led to a funding gap for startups.
