World Bank
Lebanon’s economy is projected to contract by 6.4% in 2026 as renewed conflict reversed the fragile stabilization and recovery momentum recorded in 2025, according to the latest World Bank Lebanon Economic Monitor (LEM). While Lebanon continues to face urgent humanitarian and reconstruction needs, progress on reforms remains essential to restore confidence, revive growth, and support a durable recovery.
The Summer 2026 LEM titled “A Conflict-Torn Economy” notes that Lebanon entered 2026 on firmer footing after an estimated 4.2% real GDP expansion in 2025—the fastest since the onset of the 2019 financial crisis and an upward revision from earlier projections. The rebound, supported by stronger consumption, investment, tourism, and improved high-frequency indicators, was sharply interrupted by the March 2026 escalation in conflict, which further damaged housing and infrastructure, displaced communities, disrupted supply chains, and weighed heavily on tourism and domestic demand.
The LEM notes that public finances remained strong in the first half of 2026, extending the improvement recorded in 2025, but are expected to come under increasing pressure during the remainder of the year. The government recorded an overall surplus of 3.9% of GDP in 2025, supported by improved tax compliance and stronger customs and VAT collection. However, rising conflict-related humanitarian and reconstruction needs, pressures to increase public sector wages, and slower revenue growth are expected to put more strain on public finances in the second half of 2026. Public debt remains unsustainable, and debt restructuring negotiations have yet to begin. Inflation is also expected to rise to 17.5% in 2026, driven by supply disruptions, higher shipping costs, and rising oil prices, further reducing people’s purchasing power. The exchange rate has remained stable, supported by the use of reserves and tighter Lebanese pound liquidity, but it could come under pressure if foreign inflows decline or conflict-related shocks continue. The report also notes that the banking sector remains deeply weakened, despite some progress on parts of the restructuring agenda.
The Special Focus section of the report assesses the macroeconomic impact of the 2026 conflict on Lebanon through two main channels: tourism receipts and private consumption. It finds that GDP growth would be 10.4 percentage points lower compared to non-conflict growth counterfactual. The Special Focus further underscores that prolonged displacement, destruction of physical capital, disruptions to education and health, and the potential departure of skilled workers will likely have lasting effects on Lebanon’s productive capacity and medium-term growth prospects.
The Summer 2026 LEM titled “A Conflict-Torn Economy” notes that Lebanon entered 2026 on firmer footing after an estimated 4.2% real GDP expansion in 2025—the fastest since the onset of the 2019 financial crisis and an upward revision from earlier projections. The rebound, supported by stronger consumption, investment, tourism, and improved high-frequency indicators, was sharply interrupted by the March 2026 escalation in conflict, which further damaged housing and infrastructure, displaced communities, disrupted supply chains, and weighed heavily on tourism and domestic demand.
The LEM notes that public finances remained strong in the first half of 2026, extending the improvement recorded in 2025, but are expected to come under increasing pressure during the remainder of the year. The government recorded an overall surplus of 3.9% of GDP in 2025, supported by improved tax compliance and stronger customs and VAT collection. However, rising conflict-related humanitarian and reconstruction needs, pressures to increase public sector wages, and slower revenue growth are expected to put more strain on public finances in the second half of 2026. Public debt remains unsustainable, and debt restructuring negotiations have yet to begin. Inflation is also expected to rise to 17.5% in 2026, driven by supply disruptions, higher shipping costs, and rising oil prices, further reducing people’s purchasing power. The exchange rate has remained stable, supported by the use of reserves and tighter Lebanese pound liquidity, but it could come under pressure if foreign inflows decline or conflict-related shocks continue. The report also notes that the banking sector remains deeply weakened, despite some progress on parts of the restructuring agenda.
The Special Focus section of the report assesses the macroeconomic impact of the 2026 conflict on Lebanon through two main channels: tourism receipts and private consumption. It finds that GDP growth would be 10.4 percentage points lower compared to non-conflict growth counterfactual. The Special Focus further underscores that prolonged displacement, destruction of physical capital, disruptions to education and health, and the potential departure of skilled workers will likely have lasting effects on Lebanon’s productive capacity and medium-term growth prospects.
