Lebanon faces major setback amid conflict

The Lebanese economy has experienced a severe setback due to renewed military clashes last spring, leading to a slowdown in economic growth and a reversal of the fragile recovery achieved in 2025. The World Bank reports forecast a contraction of up to 6.4% in 2026. Additionally, ongoing conflict has caused widespread destruction, significant internal displacement, and increased pressures on demand and economic activity, with inflation expected to exceed 17.5%. Furthermore, the financial system suffers from deep imbalances, despite some legislative reforms, with heavy reliance on external funding. The pressure on the exchange rate and financial stability persists as a result of the conflict and deteriorating security conditions.

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