World Bank projects war-hit Lebanon’s economy to contract by 6.4 percent

Lebanon’s economy is projected to shrink by 6.4 percent this year as conflict turns a brief post-crisis recovery into a sharp downturn, says the World Bank.

The global lender’s Summer 2026 Lebanon Economic Monitor, titled A Conflict-Torn Economy, noted that the country entered the year on stronger footing after expanding by 4.2 percent in 2025, its highest real gross domestic product (GDP) growth since the 2019 financial collapse.

“The rebound was sharply interrupted by the March 2026 escalation in conflict, which further damaged housing and infrastructure, displaced communities, disrupted supply chains and weighed heavily on tourism and domestic demand,” the report said on Friday.

“Real GDP is projected to contract by 6.4 percent in 2026, reflecting the collapse in tourism, weaker consumption, disrupted supply chains, heightened insecurity, and prolonged displacement,” it added.

Consumer prices are also under renewed pressure, with inflation expected to accelerate to 17.5 percent. The World Bank attributed the rise to supply disruptions, elevated shipping costs, and volatile fuel prices.

“Advancing reforms, particularly on banking sector restructuring and fiscal management, will be critical to restoring confidence, protecting stability, and mobilising the financing needed for reconstruction and recovery,” said Dahlia Khalifa, World Bank division director for the Middle East department at the launch of the report.

Parliament recently passed key amendments to the bank resolution law, designed to restructure failing financial institutions and map out a framework for the broader financial sector crisis.

The International Monetary Fund (IMF) endorsed the legislative progress, calling the measure “a very good step that reflects Lebanon’s commitment to aligning its legislation with the best international practices”.