By Suleiman Al-Khalidi
AMMAN (Reuters) - Lebanon's economy, already sinking before the explosion that knocked out its main port, could now shrink by double the rate previously forecast for this year, making it even harder to secure the financing the country needs to get back on its feet.
Economists say Tuesday's blast, which also damaged large parts of commercial Beirut, could lead to a GDP contraction of around 20-25% this year - far beyond the IMF's recent forecast for a 12% decline due to a deepening economic and political crisis.
Lebanese officials have estimated losses due to the blast, which killed 150 people, left thousands injured and rendered tens of thousands homeless, could run into billions of dollars.
A financial crisis had already led Lebanon to enter negotiations with the International Monetary Fund in May this year after it defaulted on its foreign currency debt, but those talks were put on hold in the absence of reforms.
Analysts say the blast highlights negligence in Lebanon's governance and puts more pressure on the government to speed up reforms in order to access aid to rebuild the economy.
While there has been an outpouring of sympathy for the country this week, there has been a notable absence of aid commitments so far, beyond urgent humanitarian aid.
"If reforms are not carried out, Lebanon will continue to sink," French President Emmanuel Macron said on Thursday as he toured the devastation in Beirut port.
Gulf states, which once helped Lebanon, meanwhile have baulked at bailing out a country where Iran-backed Hezbollah is powerful.
"It’s highly unlikely that Lebanon will be able to unlock the financing that it needs to overcome its fundamental economic problems. Some partners may be reluctant to provide support given the influential role of Iran-backed Hezbollah in the Lebanese government," said Jason Tuvey, senior emerging markets economist Capital Economics.
Lebanon's financial crisis came to a head last October as capital inflows slowed down and protests erupted over corruption and bad governance, with a hard currency liquidity crunch leading banks to impose tight curbs on cash withdrawals and transfers abroad.
The blast has put renewed pressure on the Lebanese pound, which was trading at around 8,300 per dollar on the black market after the explosion, against a level of 8,000 beforehand, dealers say.
Economists predict more erosion in the purchasing power of the pound, which has lost nearly 80% of its value since October with skyrocketing inflation topping 56%, accentuating social tensions.