World Bank forecasts 6.4% contraction for Lebanon amid escalating conflict

The World Bank’s Summer 2026 Lebanon Economic Monitor warns that real GDP will contract by 6.4% this year, erasing the modest 4.2% growth recorded in 2025—the strongest since the 2019 financial collapse. The downturn follows a March 2026 flare-up that damaged housing, infrastructure and tourism, while displacing communities and disrupting supply chains. Consumer prices are projected to rise sharply, with inflation reaching 17.5% amid higher shipping and fuel costs.

Dahlia Khalifa, the Bank’s Middle East division director, highlighted the need for banking sector restructuring and stronger fiscal policies to rebuild confidence and attract reconstruction financing. Parliament recently approved key changes to the bank resolution law, a step the International Monetary Fund called “very good” and said aligns Lebanon with international best practices. The IMF intends to hold technical meetings in Beirut next month to assess further structural reforms. Former Economy and Trade Minister Alain Hakim cautioned that political and security conditions will heavily influence short-term stability, but expressed optimism that private sector activity could rebound after the conflict ends.