World Bank projects Lebanon economy to contract by 6.4pct due to war
BEIRUT: The World Bank on Friday projected that Lebanon’s economy would contract by 6.4 percent this year, as the latest Israel-Hezbollah war derailed the country’s efforts at recovery.
The World Bank has forecasted Lebanon's economy to shrink by 6.4 percent in 2026 due to the Israel-Hezbollah war, according to a recent report. The conflict has severely impacted the country's recovery from its ongoing financial crisis, which began in 2019. The war, triggered by an attack by Iran-backed Hezbollah on Israel in March, has resulted in over 4,300 casualties.
The World Bank's projection factors in the decline in tourism, reduced consumption, disrupted supply chains, increased insecurity, and persistent displacement. Inflation is also anticipated to rise to 17.5 percent this year. Prior to the conflict, Lebanon's economy had been growing at an annual rate of 4.2 percent in 2025, the highest since the 2019 crisis.
World Bank Middle East director, Dahlia Khalifa, emphasized the importance of advancing reforms, particularly banking sector restructuring and fiscal management, to restore confidence and secure the necessary financing for reconstruction and recovery. The IMF has commended Lebanon for passing amendments to a bank resolution law aimed at tackling the banking crisis, describing it as a positive step towards aligning the country's legislation with international best practices.
Lebanon is currently negotiating with the IMF, which plans to resume discussions in Beirut next month.
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