BEIRUT, December 10, 2024 – Lebanon's real GDP growth has been cut by an estimated 6.6% in 2024 as a result of the conflict, bringing the cumulative decline in real GDP since 2019 to more than 38% by the end of the year, according to the latest World Bank Lebanon Economic Monitor (LEM) released today. The deepening contraction reflects the devastating impact of mass displacement, destruction, and reduced private consumption. It further exacerbates unresolved macroeconomic challenges and highlights the urgent need for comprehensive reforms and targeted investments in critical sectors as the only viable path forward post-conflict.
The Fall 2024 edition of the LEM titled "Mounting Burdens on a Crisis-Ridden Country" projects economic activity to contract by 5.7% in 2024, equivalent to a loss of US$4.2 billion in consumption and net exports. The Special Focus section of the report examines the impact of the conflict on the Lebanese economy by analyzing shocks to consumption and net exports, particularly service exports from tourism receipts, a core pillar of the Lebanese economy, following the significant escalation in mid-September 2024. It develops a counterfactual scenario where, in the absence of conflict, GDP would have grown, albeit tepidly, by 0.9% in 2024.
"The conflict has inflicted yet another major shock to Lebanon’s economy already in a severe crisis. It is a stark reminder of the urgent need for comprehensive reforms and targeted investments to avoid further delays in addressing long standing development priorities," said Jean-Christophe Carret, World Bank Middle East Country Director. "As Lebanon embarks on developing its post conflict recovery and reconstruction plan, an economic stabilization program and an ambitious program of reforms that strengthen governance will be critical to attract the financing needed to put the country on a sustainable long-term recovery path."
The LEM finds that Lebanon key economic indicators—including GDP growth, inflation, fiscal balance, and trade deficits—are increasingly skewed toward the downside. It highlights the fragility of the exchange rate stability, observed since August 2023, which comes at a high opportunity cost. This stability relies on increased revenue collection, fiscal restraint, and spending restrictions, resulting in unspent public sector surpluses despite the growing demand for critical spending and investment. The conflict further threatens this fragile stability as increased spending is necessary to sustain public services and support recovery efforts. This could lead to increased currency circulation or further depletion of remaining liquid foreign reserves.
According to the report, Lebanon’s fiscal position is likely to deteriorate further due to rising financing needs to secure essential services and meet urgent demands, compounded by potentially reduced fiscal revenue—particularly from VAT. With access to financing hindered due to the sovereign default, comprehensive debt restructuring is critical to regain access to international capital markets to enable the country to tackle its multifaceted challenges. Achieving macroeconomic stability, improving governance, enhancing public utilities, and bolstering human capital remain key priorities. Targeted investments are critical to support sustainable reforms, facilitate the recovery of essential services, and rebuild Lebanon’s damaged capital stock.
The report also leverages innovative data and contextual analyses to explore the country’s economic challenges. It uses Night-time Lights (NTLs) as a high-frequency, readily available tool to analyze Lebanon's economic activity. It also examines the purchasing power of a hypothetical dollar earner with income fully denominated in USD since 2019, comparing it to the purchasing power of an LBP earner over the 2019–2024 period.
