Lebanon: Economic and Political Overview

Economic Overview

After years of neglect, corruption, financial mismanagement and the war next door in Syria, the Lebanese economy entered a full-blown crisis in 2019, sparking mass protests that demanded sweeping reforms. The economic crisis deteriorated further since, due to the COVID-19 pandemic, rising public debt, a sovereign default, a currency collapse and an explosion at the port of Beirut. The traditional engines of growth in Lebanon (real estate, construction and tourism) have stalled and the banking sector, which until then had been praised for its resilience, has collapsed. Lebanon's real GDP shrank by 5.7% in 2024, representing a USD 4.2 billion loss in consumption and net exports, due to the Israel-Hezbollah conflict. This brought the total GDP decline since 2019 to over 38%, according to the World Bank. The contraction reflects the impact of displacement, destruction, and reduced private consumption after the conflict escalated in mid-September. Without the conflict, GDP could have grown by 0.9% in 2024.

In 2024, Lebanon's fiscal stance was initially projected to improve, building on the modest gains of 2023. The country estimated a 0.5% fiscal surplus for 2023, driven by increased revenues from exchange rate corrections and expenditure restraints. The 2024 government budget, ratified in February, projected a balanced fiscal position. However, with the September 2024 conflict escalation, fiscal projections for 2024 have worsened. Before the conflict, a small fiscal surplus of 0.2% was expected, but this declined due to reduced revenues and increased emergency expenditures. Revenues were projected to reach 15% of GDP, up from 13.7% in 2023, while expenditures were expected to rise to 14.8% of GDP. The conflict’s impact on fiscal performance, particularly in Q4, significantly altered these projections. Lebanon’s debt-to-GDP ratio was initially forecast to decrease to 141.9% in 2024, but this reduction does not reflect improved debt dynamics. The expected decline in nominal GDP due to the conflict escalation likely increased Lebanon's debt-to-GDP ratio. With ongoing sovereign default, Lebanon's debt remains unsustainable, and debt dynamics show no improvement. Debt restructuring is crucial to achieve significant debt reduction, restore fiscal space, and regain market access to address the compounded challenges, especially those worsened by the conflict. In February 2025, the Lebanese government announced plans to negotiate a new program with the International Monetary Fund to address public debt and financial default. This initiative aims to implement necessary reforms and restructure the banking sector to revitalize the economy. While the exchange rate has stabilized since August 2023, this stability is fragile and unsustainable, relying on fiscal restraint and spending cuts in public institutions rather than a solid monetary framework. This approach has temporarily reduced currency circulation but delayed essential investments for recovery. Rising post-conflict funding needs could deplete foreign reserves or increase currency supply, undermining exchange rate stability and fueling inflation, exposing the current strategy's unsustainability.

The country faces many humanitarian and social issues in addition to macroeconomic and political challenges. The massive influx of Syrian refugees (25% of the country's population) has shaken the country's demographic balance and labour market and is putting pressure on the costs of rent, infrastructure and supply of public services such as water and electricity. The conflict escalation starting in September 2024 has resulted in thousands of casualties, mass displacement, and unprecedented destruction. By mid-November 2024, the Ministry of Public Health reported over 3,500 deaths and 14,500 injuries. More than 1.2 million people, or a quarter of Lebanon’s population, have been displaced, creating one of the largest displacements in the country's history and intensifying urgent humanitarian needs. Since 2019, high inflation and a depreciating currency have drastically reduced purchasing power, increasing food insecurity and altering consumption patterns. Income inequality has deepened, with wealthier households often protected by dollarized incomes, while poorer families cut back on food, and rely on savings, borrowing, and external aid. The 2024 Lebanon Poverty and Equity Assessment revealed that monetary poverty has tripled, rising from 11% in 2012 to 33% in 2022 in regions like Akkar, Beirut, Bekaa, North Lebanon, and most of Mount Lebanon.

Main Sectors of Industry

Lebanon has fertile lands and benefits from a temperate climate and abundant water resources. However, the agricultural sector is underdeveloped and only contributes 1.2% of the GDP and 3.4% of employment (World Bank, latest data available). Key agricultural products include fruits (mainly apples, oranges, bananas and grapes, but also olives) which account for around 30% of total agricultural production, and vegetables (such as potatoes, tomatoes and maize) which account for more than 60% of total production; whereas coffee is the main export product. According to the latest figures from FAO, winter cereal production in 2024 was estimated at 120,000 tonnes, approximately 34% below the five-year average due to adverse weather conditions. Planting of 2025 winter cereals was delayed to December 2024 due to conflict limiting field access. Wheat imports for 2024/25 (July/June) are forecast at 670,000 tonnes, 4% above average, with fulfilment depending on foreign currency availability. The ongoing economic crisis will likely keep straining agriculture in 2025. Since the 2019 financial collapse, limited credit forces farmers to pay expenses in cash, mostly in USD. Input costs for seeds, fertilizers, pesticides, and fuel remain vulnerable to exchange rates and price fluctuations, as they rely heavily on imports.

Industry, which accounted for 12.5% of GDP in 2019, dropped to 6.6% in 2020 due to the COVID-related crisis and stood at just 2.4% in 2022, one of the lowest ratios in the world. It employs 20.3% of the workforce (World Bank, latest data available) and is dominated by the manufacturing of agricultural products, metals, minerals, furniture and other manufactured goods. The primary manufacturing sub-sectors comprise food industries, constituting approximately 19% of the total number of firms, followed by plastic and chemicals at 14%, paper and packaging as well as minerals at 11% (Lebanese Centre for Policy Studies).

Services are the dominant sector of the Lebanese economy, representing 88.6% of the country's GDP and employing 76.2% of the workforce. The banking sector was traditionally the mainstay of the economy, but it is going through a major crisis. Banking activity, even when it was sustained and lucrative, did not constitute real support for the private sector since most of the liquidity coming from banks is used to finance public debt. Tourism accounts for almost 20% of GDP and employs around 18% of the active population. The sector currently suffers from the serious economic and political crisis that the country is going through: foreign tourist arrivals fell sharply in 2024 to 1,131,100, down 32.1% from 2023 and 22.8% from 2022, according to Tourism Ministry data.

Source: World Bank, Latest data available.

Indicator of Economic Freedom

Score:

51,4/100

World Rank:

154

Regional Rank:

12

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

Sources of General Economic Information

Ministries

Ministry of Economy and Trade
Ministry of Energy and Water

Statistical Office

Central Administration of Statistics

Central Bank

Central Bank of Lebanon

Stock Exchange

Beirut Stock Exchange

Other Useful Resources

Lebanon Government portal
Zawya, economic website about the Middle East

Main Online Newspapers

Naharnet
Al Jazeera Lebanon
Al Watan Al Arabi (in Arabic)
Annabaa (in Arabic)
Al-Aman (in Arabic)
El Shark (in Arabic)
Almassira (in Arabic)
An-Nahar (in Arabic)
Al Intiqad (in Arabic)

Economic Portals

An Nahar: the country's most important paper

Political Outline

Current Political Leaders

President: Joseph AOUN (since 9 January 2025)
Prime Minister: Najib MIQATI (since 20 September 2021)

Next Election Dates

Presidential: 2031
National Assembly: May 2026

Current Political Context

Lebanon is characterised by a high level of political instability, aggravated by a severe economic crisis. The political system aims at preserving the balance between the main religious groups. Indirect presidential elections took place between 29 September 2022 and 9 January 2025 to select a successor to Michel Aoun. On 9 January 2025, during the second round of voting in the thirteenth parliamentary session, Joseph Aoun, the commander of the Lebanese Armed Forces (unrelated to Michel Aoun), was elected president with 99 votes. He assumed office the same day while retaining his military position, becoming Lebanon’s 14th president and the fifth army commander to hold the post, ending an unprecedented institutional vacuum amid a dramatic economic and political situation. In fact, shortly after the onset of the Israel–Hamas war in October 2023, Hezbollah joined the conflict, citing solidarity with Palestinians. The conflict escalated in 2024, and on 1 October 2024, Israel invaded Lebanon. In September 2024, Israel launched cyberattacks on Hezbollah’s communication systems and assassinated key leaders, including Secretary-General Hassan Nasrallah, in a bombing that destroyed the group’s Beirut headquarters. On 1 October 2024, Israel began a full-scale invasion of southern Lebanon, having previously conducted limited ground operations. The offensive dismantled much of Hezbollah’s military infrastructure and destroyed a significant portion of its missile stockpile. The conflict displaced around 96,000 people in northern Israel and over 1.4 million in Lebanon. A ceasefire agreement requiring a 60-day pause to hostilities was signed on 27 November 2024 by Israel, Lebanon, and five mediator nations, including the United States. The agreement called for Hezbollah to retreat north of the Litani River and Israel to leave southern Lebanon. On 26 January 2025, the United States said that the ceasefire had been extended until 18 February despite alleged violations by both sides.

Main Political Parties

Political forces are assigned by a fixed number of seats according to their religious denomination. They group to form electoral alliances, but such coalitions are weakly connected in practice. The main parties represented in the parliament are:

- Strong Republic: nationalist, parliamentary bloc of the Lebanese Forces in the Lebanese Parliament. Christian-based and former militia during the Lebanese civil war, right-wing
- Loyalty to the Resistance Bloc: it is the political wing of Hezbollah in the Parliament of Lebanon, Shia Islamist
- Development and Liberation Bloc: coalition formed by the Amal Movement and the Arab Socialist Ba'ath Party
- Free Patriotic Movement: right-wing, christian democracy, civic nationalism
- Progressive Socialist Party: centre/centre-left, its confessional base is in the Druze sect
- Kataeb Party: right-wing, Christian.

Type of State

Republic based on confessionalism, parliamentary democracy. This means that each political position must be filled by a person of a particular denomination.

Executive Power

The President is the head of state and is elected by the National Assembly for a six-year term. However, the President is not allowed to serve consecutive terms. The Prime Minister is appointed by the President in consultation with the National Assembly and, importantly, with the approval of the largest parliamentary bloc. The Prime Minister acts as the head of government and serves as long as he has the support of the parliament. Though the Prime Minister enjoys executive powers, which include the implementation of the law in the country and running the day-to-day affairs, the President also holds a strong and influential position, which includes the promulgation of laws passed by parliament and ratification of treaties. The Cabinet is chosen by the Prime Minister in consultation with the President and members of the National Assembly. As per the constitution of the country, the President must be a Maronite Catholic Christian and the Prime Minister a Sunni Muslim.

Legislative Power

The legislature in Lebanon is unicameral. The parliament, called the National Assembly, consists of 128 seats, with its members elected by popular vote on the basis of proportional representation and sectarian quotas. Members serve four-year terms. Legislative power is vested in both the government and the parliament. The executive branch of the government is directly or indirectly dependent on the support of the parliament, often expressed through a vote of confidence. The Prime Minister cannot dissolve the parliament nor can he veto its enactments. The Speaker of the Parliament must be a Shia Muslim.

Indicator of Freedom of the Press

World Rank:

107/180

Indicator of Political Freedom

Ranking:

Partly Free

Political Freedom:

5/7

Civil Liberties:

4/7

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House