Panorama econòmic

Economic indicators

After years of neglect, corruption, financial mismanagement and the war next door in Syria, the Lebanese economy entered a full-blown crisis in 2019, sparking mass protests that demanded sweeping reforms. The economic crisis deteriorated further since, due to the COVID-19 pandemic, rising public debt, a sovereign default, a currency collapse and an explosion at the port of Beirut. The traditional engines of growth in Lebanon (real estate, construction and tourism) have stalled and the banking sector, which until then had been praised for its resilience, has collapsed. Lebanon's real GDP shrank by 5.7% in 2024, representing a USD 4.2 billion loss in consumption and net exports, due to the Israel-Hezbollah conflict. This brought the total GDP decline since 2019 to over 38%, according to the World Bank. The contraction reflects the impact of displacement, destruction, and reduced private consumption after the conflict escalated in mid-September. Without the conflict, GDP could have grown by 0.9% in 2024.

In 2024, Lebanon's fiscal stance was initially projected to improve, building on the modest gains of 2023. The country estimated a 0.5% fiscal surplus for 2023, driven by increased revenues from exchange rate corrections and expenditure restraints. The 2024 government budget, ratified in February, projected a balanced fiscal position. However, with the September 2024 conflict escalation, fiscal projections for 2024 have worsened. Before the conflict, a small fiscal surplus of 0.2% was expected, but this declined due to reduced revenues and increased emergency expenditures. Revenues were projected to reach 15% of GDP, up from 13.7% in 2023, while expenditures were expected to rise to 14.8% of GDP. The conflict’s impact on fiscal performance, particularly in Q4, significantly altered these projections. Lebanon’s debt-to-GDP ratio was initially forecast to decrease to 141.9% in 2024, but this reduction does not reflect improved debt dynamics. The expected decline in nominal GDP due to the conflict escalation likely increased Lebanon's debt-to-GDP ratio. With ongoing sovereign default, Lebanon's debt remains unsustainable, and debt dynamics show no improvement. Debt restructuring is crucial to achieve significant debt reduction, restore fiscal space, and regain market access to address the compounded challenges, especially those worsened by the conflict. In February 2025, the Lebanese government announced plans to negotiate a new program with the International Monetary Fund to address public debt and financial default. This initiative aims to implement necessary reforms and restructure the banking sector to revitalize the economy. While the exchange rate has stabilized since August 2023, this stability is fragile and unsustainable, relying on fiscal restraint and spending cuts in public institutions rather than a solid monetary framework. This approach has temporarily reduced currency circulation but delayed essential investments for recovery. Rising post-conflict funding needs could deplete foreign reserves or increase currency supply, undermining exchange rate stability and fueling inflation, exposing the current strategy's unsustainability.

The country faces many humanitarian and social issues in addition to macroeconomic and political challenges. The massive influx of Syrian refugees (25% of the country's population) has shaken the country's demographic balance and labour market and is putting pressure on the costs of rent, infrastructure and supply of public services such as water and electricity. The conflict escalation starting in September 2024 has resulted in thousands of casualties, mass displacement, and unprecedented destruction. By mid-November 2024, the Ministry of Public Health reported over 3,500 deaths and 14,500 injuries. More than 1.2 million people, or a quarter of Lebanon’s population, have been displaced, creating one of the largest displacements in the country's history and intensifying urgent humanitarian needs. Since 2019, high inflation and a depreciating currency have drastically reduced purchasing power, increasing food insecurity and altering consumption patterns. Income inequality has deepened, with wealthier households often protected by dollarized incomes, while poorer families cut back on food, and rely on savings, borrowing, and external aid. The 2024 Lebanon Poverty and Equity Assessment revealed that monetary poverty has tripled, rising from 11% in 2012 to 33% in 2022 in regions like Akkar, Beirut, Bekaa, North Lebanon, and most of Mount Lebanon.

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