In its latest report on the Lebanese economic situation released on Thursday, the World Bank said that “four years into the economic and financial crisis, Lebanon’s macroeconomic framework remains severely impaired,” weighing on the “spillover effects from the ongoing conflict centered in Gaza” which poses “yet another large shock to Lebanon’s precarious growth model.”

The special focus of Lebanon Economic Monitor (LEM) Fall 2023 titled “The Impact of the Conflict in the Middle East on the Lebanese Economy,” provides an “update on key economic developments and analyzes their implications for the country’s outlook and assesses the impact of the current conflict and its spillover on Lebanon’s economy and its growth prospects amid a prolonged political and institutional vacuum.”

The LEM Special Focus section examines the “impact of the ongoing conflict (in Gaza) – now into its third month – on the Lebanese economy”. It states that even “as tourism accounted for almost 26 percent of current account receipts in 2022, growth and current account dynamics are very sensitive to the ongoing conflict.” According to the report “assuming that the current containment in the military confrontation to the southern borders persists, a scenario analysis assessing the effect of the drop in tourism spending on economic growth finds that real GDP will contract by 0.6 percent to 0.9 percent (reversing the positive pre-conflict baseline of 0.2 percent growth in 2023).”

“With limited progress towards comprehensive crisis resolution, Lebanon remains entrenched in a socioeconomic and financial crisis, further exacerbated by institutional and political stalemate,” said Jean-Christophe Carret, World Bank Middle East Country Director. “While tourism has recently been a positive contributor to economic growth, the tourism sector alone cannot substitute for more comprehensive, sustainable and diverse growth drivers that are better placed to withstand shocks and help put the economy back on a solid recovery path.”