Warning comes as anti-government demonstrators pushed on with rallies and hundreds of school children boycotted classes
The World Bank urged protest-hit Lebanon on Wednesday to form a new government quickly, warning of the threat of an economic downturn that would deepen poverty and worsen unemployment.
The warning came as anti-government demonstrators pushed on with rallies and hundreds of school children boycotted classes.
Lebanon's unprecedented protest movement has rallied since October 17 against a political class deemed incompetent and corrupt, despite the government's resignation last week.
The outgoing cabinet continues to function in a caretaker capacity but political leaders are haggling over the make-up of the next government, in a delay donors say the debt-saddled country can ill afford.
The World Bank warned that a "rapid government formation that meets the expectations of all Lebanese people is the most urgent step".
Representatives of the Washington-based institution had met with embattled President Michel Aoun, who has pledged a raft of reforms to combat corruption following the protests.
In its statement, the World Bank also warned "we expect the recession to be even more significant" than previously, having forecast a contraction of 0.2 percent before the ongoing political turmoil.
Without quick steps to address the crisis, about half of Lebanon's population could fall into poverty and unemployment could "rise sharply", the lender said.
"With every passing day, the situation is becoming more acute," warned World Bank regional director Saroj Kumar Jha.
Even before the protests started last month, growth in Lebanon had stalled in the wake of repeated political deadlocks in recent years, compounded by the war in Syria.
Public debt stood at more than $86 billion, or higher than 150 percent of Gross Domestic Product, according to the finance ministry.
Moody's ratings agency on Tuesday downgraded Lebanon's sovereign debt, saying the sweeping anti-government protests had hit investor confidence and threatened macroeconomic stability.
A long list of grievances have spurred exasperated Lebanese to protest, but government corruption and dire living conditions are among the key concerns.
Lebanon is ranked 138th out of 175 countries in Transparency International's 2018 corruption perceptions index, with key sectarian leaders accused of running demi-fiefdoms.
After meeting the World Bank on Wednesday, Aoun said investigations looking into corruption cases involving current and former officials will not spare a single suspect.
He said 17 such cases have already been referred for investigation.
"The next government will include competent ministers, who are not suspected of corruption," Aoun said on Twitter, seemingly endorsing the demands of protesters.
But his pledge came as hundreds of students led anti-government demonstrations across the country, refusing to return to class before the demands of the protest movement are met.
In Beirut, dozens gathered in front of the education ministry, brandishing Lebanese flags and once again chanting slogans demanding the removal of the political class.
"What will I do with a school leaver's certificate if I don't have a country," one pupil told Lebanese television.
In the largest student-led protest, crowds streamed into a central square in the southern city of Sidon, demanding better public education and more job opportunities for school leavers, the state-run National News Agency (NNA) reported.
In a school in the resort town of Jounieh, just north of the capital, pupils mobilised against school governors. Protests also took place in the southern cities of Tyre and Nabatieh, the eastern city of Zahleh and the northern city of Byblos, according to NNA and other Lebanese media reports.
In other ways, protests were easing off. No key roads were blocked on Wednesday morning, banks were open again and classes resumed at many schools after a two-week gap.
Demonstrators did however gather around key state institutions for a second day in a row, in what appeared to be a new tactic.
In the capital hundreds rallied around the Palace of Justice, demanding an independent judiciary free of political interference, an AFP correspondent reported.
"We don't want judges who receive orders," read one protester's placard.
A smaller group gathered near the central bank, accusing it of aggravating the economic crisis.
Economist Nassib Ghobril said the demands of the protest movement are aligned with those of international donors, especially in terms of the "fight against corruption, and (demands for) good governance and financial rehabilitation."
"Today, there is an opportunity to see real change" he said.