The World Bank projects Lebanon's economy will contract by 6.4 percent in 2026, warning that renewed fighting between Israel and Hezbollah has shattered the country's fragile recovery. Inflation is expected to accelerate to 17.5 percent as the conflict disrupts supply chains and devastates tourism.
The March 2 military escalation displaced roughly 1.2 million people, killed more than 4,300 and reduced some 70 southern border villages to rubble. Finance Minister Yassine Jaber estimated combined losses from the conflict could reach $20 billion. The damage represents a sharp reversal from 2025, when real GDP expanded by an estimated 4.2 percent, the fastest growth since the 2019 financial collapse.
Despite the downturn, the International Monetary Fund endorsed recent legislative progress on banking reforms and plans to resume technical meetings in Beirut next month. The government recorded a fiscal surplus of 3.9 percent of GDP last year, though the Lebanese pound has lost more than 95 percent of its value against the U.S. dollar.