World Bank projects war-hit Lebanon’s economy to contract by 6.4 percent

What the report says

The World Bank says Lebanon’s economy is headed for a steep reversal in 2026, projecting a 6.4 percent contraction as renewed conflict with Israel disrupts recovery efforts. In its Summer 2026 Lebanon Economic Monitor, titled “A Conflict-Torn Economy,” the lender said Lebanon had entered the year with momentum after 2025 growth of 4.2 percent, its strongest real GDP expansion since the country’s 2019 financial collapse.

According to the report, the March 2026 escalation damaged housing and infrastructure, displaced communities, interrupted supply chains and hurt tourism and domestic demand. The World Bank said the downturn would also be accompanied by rising prices, with inflation expected to reach 17.5 percent because of supply bottlenecks, higher shipping costs and volatile fuel prices.

The report underlined that economic recovery now depends not only on financial measures but also on security conditions and political decisions. World Bank official Dahlia Khalifa said reforms to banking-sector restructuring and fiscal management would be important for restoring confidence and helping fund reconstruction. The article also notes that Lebanon’s parliament has passed amendments to the bank resolution law, while the IMF has welcomed that step and plans further technical talks with Lebanese officials.

The warning matters because Lebanon has spent years trying to stabilize a banking and debt crisis while coping with repeated shocks. The World Bank’s outlook suggests that war-related damage is again overwhelming fragile gains, even as Lebanese officials and international lenders continue to discuss broader reforms and possible bailout support.