World Bank Expects Lebanese Economy to Contract by 6.4 Percent in 2026
Washington, Aug 21 (KUNA) -- The World Bank forecast in a report issued on Friday that Lebanon’s economy will contract by 6.4 percent and inflation will rise to 17.5 percent in 2026, due to the “resumption of conflict” with the Israeli occupying entity since March last year.
In a statement, the Bank said its latest edition of the “Lebanon Economic Monitor: An Economy Weakened by Conflict” report stated, “We expect the Lebanese economy to contract by 6.4 percent in 2026 as the resumption of conflict reverses the momentum of the fragile stability and recovery recorded in 2025.”
It noted that Lebanon “entered 2026 on more solid foundations after achieving real GDP growth of approximately 4.2 percent in 2025, the highest growth rate since the onset of the financial crisis in 2019.” However, it clarified that “this recovery, supported by increased consumption, investment, tourism, and improved high-frequency economic indicators, suffered a sharp setback due to the escalation of conflict since March last year, which caused further damage to housing and infrastructure and led to widespread internal displacement.”
The report mentioned that the Lebanese government “achieved an overall fiscal surplus of 3.9 percent of GDP in 2025, supported by strengthened tax compliance and higher customs duties and value-added tax revenues.” Nevertheless, it pointed out that “increasing humanitarian needs related to the conflict, reconstruction requirements, and pressures to raise public sector employees’ salaries, alongside slowing revenue growth, are expected to impose further burdens on public finances during the second half of 2026.”
It also clarified that Lebanon’s public debt “remains unsustainable, and debt restructuring negotiations have not yet begun.”
The report also predicted that inflation would rise to “17.5 percent in 2026, driven by supply disruptions, rising shipping costs, and higher oil prices, leading to further erosion of the population’s purchasing power.”
It further noted that Lebanon’s banking sector “continues to suffer from deep imbalances, despite some progress in implementing aspects of the restructuring agenda.” (End) R.S.R / S.A.M
