Lebanon’s economy has been devasted by a series of events, such the 2019 crisis and multiple wars waged by Israel [Getty/file photo]
Israel’s ongoing war in Lebanon is expected to shrink the country’s economy by at least 7 percent this year and could cost the country an estimated $20 billion, Finance Minister Yassine Jaber told Reuters.
The current conflict, which erupted on 2 March after the country was dragged into the wider Middle East conflict triggered by the US and Israeli assault on Iran, has dealt a new blow to Lebanon, already suffering from a 2019 financial meltdown and a 2024 war between Hezbollah and Israel.
In an interview on Wednesday, Jaber said he expected the current war to prompt an economic contraction of between 7 and 10 percent in 2026, and that direct and indirect damage to Lebanon could total as much as $20 billion. The 2024 war cost Lebanon at least $8.5 billion in physical damage and economic losses, according to the World Bank. Lebanon’s real GDP contracted by 7.1 percent in 2024, the World Bank said, leading to a cumulative GDP decline of nearly 40 percent since 2019.
In January, the World Bank had projected a modest recovery of 4 percent GDP growth in 2026 if the country remained stable, brought in some reconstruction aid and kept up efforts to introduce financial reforms.
Jaber said the government had been hoping for a budget surplus this year, but instead had allocated $50 million in public funds to support more than one million people displaced by the war.
Risks to Gulf remittances
Hostilities between Iran-backed Hezbollah and Israel have persisted despite a ceasefire announced on 16 April, amid near-daily violations.
At least 400 people in Lebanon have been killed since the truce announcement was made.
Israel has kept up strikes on southern and eastern Lebanon, and its troops are razing homes in a southern border strip of Lebanon, citing security concerns. Hezbollah has continued targeting northern Israel and Israeli military positions within Lebanon in retaliation.
More than 3,000 people have been killed in Lebanon since 2 March, according to Lebanese authorities.
Jaber said the full extent of the war’s economic damage to Lebanon would be determined by remittance inflows from the Gulf, the success of this summer’s tourist season and whether Israeli strikes would continue to destroy properties and livelihoods in Lebanon.
Remittances are a cornerstone of Lebanon’s economy, with hundreds of thousands of Lebanese in Gulf capitals sending money back home or returning for the holidays to spend their earnings.
But as Gulf economies come under pressure from the Iran war, Jaber is worried that Lebanon’s expats will be unable to sustain this role.
“This time, the regions where the Lebanese work are themselves affected,” he said.
Loans, no grants
International aid has also fallen well short of what Lebanon received during the 2024 war, when it secured $700 million in humanitarian support and dozens of planeloads of aid, Jaber said.
Despite a visit by UN Secretary-General António Guterres and an appeal for $300 million, only around $100 million has materialised, he said. A loan of $200 million from the World Bank and a €45 million grant from the European Union have provided some relief.
“We are depending on loans today,” Jaber said. “We are not getting a lot of grants.”
State revenues are also down, he said, but the government has been able to maintain the value of the Lebanese pound against the dollar, a rare bright spot in an otherwise bleak economic outlook.
“We are tired, our ability to withstand is being tested time and time again and I think the Lebanese are tired of this,” Jaber said.
