Key facts
- The World Bank forecasts a 6.4% contraction in Lebanon's economy for 2026.
- The war is cited as the primary reason for the projected economic downturn.
- Inflation is expected to reach 17.5% this year.
- Lebanon's economy had shown recovery signs with a projected 4.2% growth in 2025.
- Reforms in banking and fiscal management are deemed critical for recovery.
The World Bank projects that Lebanon's economy will contract by 6.4 percent in 2026, attributing the downturn to the ongoing war which has disrupted tourism, consumption, and supply chains. Inflation is also anticipated to rise to 17.5 percent this year, further diminishing purchasing power.
Prior to the current conflict, Lebanon's economy had shown signs of recovery, with an estimated real GDP growth of 4.2 percent projected for 2025, marking the fastest growth since the 2019 financial crisis. However, the recent escalation of hostilities has derailed these efforts.
Dahlia Khalifa, the World Bank's Middle East director, emphasized that advancing reforms, particularly in banking sector restructuring and fiscal management, is crucial for restoring confidence, ensuring stability, and securing the necessary financing for reconstruction and recovery.
In response to demands from the international community, Lebanon's parliament recently passed amendments to a bank resolution law. The International Monetary Fund welcomed this development, viewing it as a positive step towards aligning Lebanese legislation with international best practices. The IMF is expected to resume discussions in Beirut next month.