Lebanon’s real GDP is projected to grow by 4.7% in 2025, bolstered by anticipated reforms and a tourism rebound. Nonetheless, ongoing political instability and a severe financial crisis hinder substantial investment inflows. The World Bank’s latest Economic Monitor revises last year’s GDP contraction to 7.1%, citing a nearly 40% decline since 2019. Inflation is set to moderate to 15.2% if exchange rate stability persists, alongside plans for public spending injections. The report underscores an urgent need for comprehensive reforms.
Lebanon’s economic forecast looks slightly promising as the World Bank recently estimated a real GDP growth of 4.7% for 2025. This growth is attributed to potential reform advances, a rebound in tourism, and a rise in consumer spending despite ongoing capital inflows being limited. However, the overall outlook remains precarious due to persistent political and security instability, alongside an unresolved financial crisis that hampers both foreign investments and larger financial inflows.
The latest Lebanon Economic Monitor (LEM), released on June 19, 2025, titled “Turning the Tide?” revises the previous GDP contraction estimate for 2024, now predicted at 7.1%, down from an earlier 5.7%. Cumulatively, since 2019, the economy has faced an alarming decline amounting to nearly 40%. Meanwhile, inflation is expected to drop to 15.2% in 2025, which assumes ongoing stability in the exchange rate and subdued global inflation trends. Public spending on essential services might experience a slight uptick, contingent on improved revenue collection and a balanced budget for 2025. Still, high fiscal pressures linger, calling for extensive structural reforms for long-term viability.
Jean-Christophe Carret, Director of the World Bank Middle East Division, commented, “Recent political developments brought a renewed momentum and offer an opportunity to address the fundamentals of Lebanon’s overlapping financial, economic, and institutional crises.” He emphasized that prioritizing actionable and impactful measures could help Lebanon confront these critical challenges and strive toward recovery.
The LEM report also analyzes the effects of escalating global trade uncertainties on Lebanon’s economy, which primarily has limited direct impacts since major markets only account for about 4% of total goods exports. However, predicting indirect effects poses challenges, given that they hinge on shifting global trade dynamics that could impact investment, inflation, and economic activity overall.
Special sections in the report delve into inflation trends and dynamics related to the real effective exchange rate. Initially, inflation matched global trends but has since been largely affected by exchange rate depreciation post-2019. Although a stable exchange rate and increased dollarization might revert inflation to pre-crisis norms, it is likely to persist above global averages due to ingrained domestic factors. The report notes a significant depreciation of the real effective exchange rate during the crisis, yet this did not translate into improved export performance because of structural limitations and continued dollarization.
The report’s Special Focus section lays out a detailed one-year action plan aimed at bolstering the government’s reform agenda. Drawing insights from two decades of collaboration with the World Bank, the plan sketches out achievable, high-impact initiatives that synchronize with governmental goals and can fit within the current political framework. Key actions include restoring macro-financial stability, rebuilding public trust, and establishing a new economic development model that works effectively.
Overall, while Lebanon’s future might hold some tentative signs of recovery, serious financial, political, and economic hurdles remain, demanding coherent and robust responses from all sectors involved.
In summary, Lebanon’s economic outlook for 2025 seems moderately hopeful with a projected GDP growth of 4.7% driven by reform progress and increased tourism. However, substantial challenges persist due to a fragile political environment and ongoing financial crises. Experts stress the need for decisive actions and reforms to rebuild trust and stabilize the economy long-term. Though the country has a plan in place, the path to recovery is anything but straightforward, densely chartered with obstacles that need addressing.
Original Source: reliefweb.int
