Central Bank sees small recovery
but is warning of structural risks

Many sectoral indicators show growth

The economy has entered a tentative recovery phase in 2025 after years of collapse and a devastating war, but the rebound remains fragile and heavily dependent on consumption and remittances, according to the Central Bank’s (BDL) Macroeconomic Review.

BDL estimates that GDP, which contracted by 6.4 percent in 2024, is set to return to modest growth this year. Political stabilization – marked by the election of a new President and the formation of a government the appointment of a BDL governor – has helped restore confidence and reactivated public institutions after years of paralysis.

Early indicators are improving: cement deliveries rose 39 percent in the first half of 2025, Customs receipts more than doubled, and passenger arrivals at Beirut airport increased 3.4 percent. Tourism, which generated $4.7 billion in revenues last year, is expected to strengthen further following the lifting of some Gulf travel restrictions.

Inflation, once among the world’s highest (when calculated in Lebanese lira), has eased dramatically. Headline consumer prices rose 15 percent year-on-year in June, down from 42 percent a year earlier, while core inflation stood at 16.4 percent. BDL attributed the decline to exchange-rate stability around LL89,500/USD, tighter fiscal and monetary policy, and the dollarization of transactions.

However, the report underlined that the banking sector remains crippled. Since 2019, balance sheets have shrunk by nearly 60 percent, lending has collapsed to just $553 million, and branch networks have contracted by 40 percent. In contrast, para-banking institutions and cash-based operations have expanded rapidly, reflecting what BDL called a “structural shift” in financial intermediation.

On the external front, the current account deficit narrowed slightly to $5.6 billion in 2024, cushioned by $5 billion in net remittances. BDL’s foreign currency reserves rose to $11.3 billion by mid-2025, while gold reserves surged 41 percent year-on-year to $30 billion on the back of higher global prices.

The review cited progress on reforms, including amendments to the banking secrecy law, advancement of restructuring legislation, and stronger AML/CFT compliance following Lebanon’s grey-listing by the Financial Action Task Force. But it warned that without comprehensive financial restructuring and a credible recovery plan, the country risks being locked into a low-growth, consumption-driven trajectory.

“Recent legislative momentum and institutional progress signal a potential turning point,” the report said. “If sustained, these efforts could lay the foundations for a more durable and inclusive recovery,” it said.