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Lebanon’s economic challenges are deepening, and a full-scale war is not required to exacerbate its already bleak outlook. The country has been grappling with a multidimensional crisis for the past four years, and the nightmare continues.
Just a few days after the outbreak of the Gaza conflict near its southern border, Lebanon grapples with another setback, disrupting the fragile economic stability it had maintained over the past four months, during which the Lebanese pound had remained relatively stable against the US dollar.
Marwan Barakat, head of the research department at Bank Audi, is blunt about his concerns regarding the potential fallout of an extended conflict in Lebanon, a situation that could have devastating consequences for public finances and the overall economy.
In an interview with This is Beirut, he pointed out the grim economic indicators in Lebanon, citing soaring inflation at 250%, an unemployment rate of 30%, and the impoverishment of 80% of the population.
Barakat expressed serious concerns about the potential for significant negative economic growth in Lebanon if the conflict escalates. He points out that “during times of war, economies typically experience a sharp decline in GDP in the first year before stabilizing in subsequent years. For comparison, Ukraine experienced real GDP growth of -29% in 2022 before stabilizing at a lower level in 2023. Syria underwent a -45% contraction, Libya -41%, and Yemen -43% in their first year of conflict.” He then raises the question of what awaits the already fragile Lebanese economy in the event of war, emphasizing that “war could potentially widen the cyclical gap in gross domestic product, which currently stands at 70%.”
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At the microeconomic level, the hospitality and tourism sectors have experienced a substantial setback since October 8. The statistics provided by industry experts are nothing short of staggering.
Jean Abboud, president of the Syndicate of Travel Agents, reports a sharp decline in daily ticket sales from $2.2 million to a mere $500,000, with domestic tourism plummeting by 95%. Meanwhile, the restaurant sector has witnessed a shocking 95% decline during this period, as pointed out by Tony Rami, President of the Restaurant Owners Syndicate. Jean Beyrouthi, president of the Syndicate of Beach and Resort Owners, paints a bleak picture, stating that hotels have recorded a complete absence of reservations until the end of March.
Despite these alarming numbers, it is still premature to assess the impact of the Gaza events on the year-end holiday season. In Lebanon, the landscape is constantly changing, and circumstances can undergo significant shifts from one day to the next.
