Lebanese economic recovery in 2025 will be undone by 2026 conflict, World Bank report shows
The report, titled “A Conflict-Torn Economy,” estimated that Lebanon’s real gross domestic product (GDP) expanded by 4.2% in 2025, marking its strongest growth since 2019.
The World Bank's latest Lebanon Economic Monitor report warns that the Lebanese economy's recovery, projected to expand by 4.2% in 2025, will be undone by conflict in 2026. The report titled "A Conflict-Torn Economy" states that the 2025 growth was fueled by increased private consumption, investment, tourism, and improvements in economic indicators.
However, the recovery was abruptly halted by Hezbollah's decision to resume war with Israel in March 2026. This conflict has caused damage to housing, infrastructure, and supply chains, leading to displacement of 360,000 people, including 22,000 in collective shelters. Additionally, over 700,000 people are still affected by water infrastructure damage, with 1.2 million displaced internally.
The conflict is projected to reduce GDP growth by 10.4 percentage points compared to a scenario without conflict. World Bank Middle East Director Dahlia Khalifa emphasized that Lebanon's fragile recovery has been significantly set back by the renewed conflict. To restore confidence and mobilize reconstruction financing, critical reforms, particularly in banking sector restructuring and fiscal management, are emphasized.
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