World Bank says GDP
to shrink due to Gaza war

Earlier prediction of modest

GDP growth now reversed into contraction

The World Bank’s recent report, ‘In the Grip of a New Crisis’, underscores the severe setbacks the country faces in its economic recovery, marking a reversal of the slight progress observed prior to the start of the Gaza war in October 2023. Economic growth was projected by the World Bank to expand by 0.2 percent in 2023, a positive shift for the first time since 2018. Other observers had much higher growth forecasts.

The pre-war optimism was attributed to two key factors: the buoyancy of summer tourism and the substantial inflow of remittances from the Diaspora. However, the eruption of the Gaza conflict in October swiftly derailed these positive projections, plunging the nation back into possibly a recession.

The report emphasizes that the primary driver of this economic contraction lies in the significant blow to tourism spending. Winter holiday travel reservations to Lebanon have suffered a substantial blow, with more than half being canceled. The World Bank warns that relying solely on tourism cannot form the basis for a robust economic recovery. However, the report seems to have been written earlier than the beginning of the holiday season looks to be very busy.

As a consequence of these developments, Lebanon’s real gross domestic product (GDP) is anticipated by the World Bank to decline, ranging from minus 0.6 percent to minus 0.9 percent, contingent on the extent of the tourism shock.

World Bank Middle East Country Director Jean-Christophe Carret underscores the ongoing socioeconomic and financial crisis in Lebanon, further exacerbated by institutional and political stalemates. While recognizing the limited reforms by the Central Bank, Carret emphasizes that the tourism sector alone cannot serve as a sufficient foundation for economic recovery. He calls for more comprehensive, sustainable, and diverse growth drivers to guide the economy towards a solid recovery path.