Lebanon's economy has faced a significant setback, with real GDP growth declining by an estimated 6.6% in 2024 due to ongoing conflict. This brings the total decline in real GDP since 2019 to over 38%, as reported by the World Bank's latest Lebanon Economic Monitor (LEM). The contraction is attributed to mass displacement, destruction, and reduced private consumption, further highlighting unresolved macroeconomic issues.
The Fall 2024 edition of the LEM, titled "Mounting Burdens on a Crisis-Ridden Country," forecasts a 5.7% economic contraction for the year, translating to a loss of $4.2 billion in consumption and net exports. The report examines how the conflict has impacted key sectors like tourism service exports following escalations in September 2024. It suggests that without the conflict, GDP might have grown by 0.9%.
Jean-Christophe Carret, World Bank Middle East Country Director, emphasized: "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."
Key economic indicators such as GDP growth, inflation, fiscal balance, and trade deficits are reportedly skewed negatively. Exchange rate stability since August 2023 remains fragile due to increased revenue collection and fiscal restraint measures resulting in unspent public sector surpluses despite growing demands for critical spending.
The report warns that Lebanon's fiscal position may worsen with rising financing needs for essential services amidst potentially reduced revenue from VAT collections. Sovereign default hinders access to financing; thus comprehensive debt restructuring is deemed necessary for regaining access to international capital markets.
Achieving macroeconomic stability alongside governance improvements and human capital enhancement remain top priorities according to the LEM findings. Targeted investments are crucial for supporting sustainable reforms needed for recovery efforts.
Additionally leveraging innovative data analysis methods like Night-time Lights (NTLs), the report explores economic challenges faced by Lebanon while comparing purchasing power trends between USD earners versus LBP earners over recent years.