World Bank projects Lebanon 6.4% contraction

The World Bank Group released its Lebanon Economic Monitor on August 21, 2026, projecting that Lebanon's real GDP will contract by 6.4% in 2026 due to the renewed Israel-Hezbollah conflict that escalated in March 2026. The report notes that Lebanon entered 2026 on firmer footing after an estimated 4.2% GDP growth in 2025, the fastest since the 2019 financial crisis, but the war sharply interrupted the recovery. The conflict has caused further damage to housing and infrastructure, displaced around 1.2 million people, disrupted supply chains, and severely affected tourism and domestic demand. Inflation is expected to rise to 17.5% in 2026, driven by supply disruptions, higher shipping costs, and rising oil prices. The World Bank Group's Middle East director, Dalia Khalifa, emphasized the need for reforms, particularly in banking sector restructuring and fiscal management, to restore confidence and mobilize reconstruction financing. Lebanon's parliament recently passed amendments to a bank resolution law, which the International Monetary Fund welcomed as a positive step. The IMF plans to resume meetings in Beirut next month. The conflict has reportedly killed over 4,300 people and injured over 12,700, with extensive destruction in southern Lebanon. Finance Minister Yassine Jaber estimated combined losses since 2023 could reach $20 billion. The Lebanon — Lebanese pound has lost over 95% of its value against the U.S. dollar since the crisis began, and public debt remains unsustainable.