Lebanon's economy is expected to contract by 6.4% this year as conflict turns its brief post-crisis recovery into a sharp recession, according to the World Bank.
In its Summer 2026 Lebanon Economic Monitor report titled “An Economy Torn by Conflict,” the global financial institution noted that Lebanon entered this year on a stronger footing after posting 4.2% growth in 2025 — its highest real GDP growth since the 2019 financial collapse.
“The recovery was sharply interrupted by the escalation of conflict in March 2026, causing additional damage to housing and infrastructure, displacing communities, disrupting supply chains, and weighing on tourism and domestic demand,” the report released on Friday said.
“Real GDP is projected to contract by 6.4% in 2026, reflecting a collapse in tourism, weaker consumption, disrupted supply chains, heightened insecurity, and prolonged displacement,” the report added.
Consumer prices are also under renewed pressure, with inflation projected to rise to 17.5%. The World Bank attributed the increase to supply disruptions, higher transportation costs, and volatile fuel prices.
“Advancing reforms, particularly on banking sector restructuring and fiscal management, will be critical to restoring confidence, safeguarding stability, and mobilizing the financing needed for reconstruction and recovery,” Dahlia Khalifa, the World Bank’s regional director for the Middle East, said at the report’s launch.
Lebanon’s parliament recently passed key amendments to the bank resolution law, aiming to restructure loss-making financial institutions and outline a framework to resolve the broader financial sector crisis.
The International Monetary Fund (IMF) welcomed the legislative step, calling it “a very good step reflecting Lebanon’s commitment to align its legislation with best international practices.”
The IMF, which has maintained ongoing discussions with Lebanese officials to reach a formal rescue program, confirmed plans to resume technical meetings in Beirut next month to further assess structural policy measures.
“Economic stability in Lebanon is possible amid the current regional turmoil, but the ability to achieve it in the short term is also determined by politics and security, not just economic issues,” Alain Hakim, a former economy and trade minister, said in an interview with Lebanon’s Akhbar Al Yawm newspaper.
“There is no reason for extreme pessimism because we have available elements in the country on all fronts, including the existence of constitutional institutions, along with indicators of improved economic activity in the pre-war period,” Hakim said. “Thus, when this war ends, this activity will return, especially from the private sector and individual initiatives.”
