The World Bank states that the war in Gaza is likely to plunge Lebanon into a recession again

The ongoing Israel-Hamas war is expected to reverse Lebanon’s already fragile economy back into a recession, according to a report by the World Bank released on Thursday. The report highlights that the primary cause of this economic downturn is the significant decline in tourism spending.

Since the Gaza conflict commenced on October 7, Lebanon’s southern border has been a hotspot for frequent skirmishes, predominantly between the Israeli army and Hezbollah. This conflict has undermined the slight economic recovery Lebanon was experiencing after enduring a prolonged financial crisis.

Before October 2023, Lebanon’s economy was predicted to experience marginal growth in 2023, the first since 2018, with a projected expansion of 0.2 percent. This optimistic forecast was largely attributed to an increase in summer tourism and remittances from the extensive Lebanese diaspora abroad.

However, the current conflict and its repercussions in Lebanon are rapidly overturning these modest growth projections, driving the economy back into recession. The World Bank report specifically points to the adverse effect on tourism spending as the primary reason for this economic contraction.

The World Bank also noted that over half of the travel bookings to Lebanon for the winter holidays have been canceled. This situation emphasizes that tourism alone cannot be relied upon as a foundation for Lebanon’s economic recovery.

Consequently, Lebanon’s real gross domestic product (GDP) is anticipated to decrease to between minus 0.6 percent and minus 0.9 percent, contingent upon the severity of the tourism shock.

Lebanon’s economy collapsed in late 2019, leading to widespread poverty among its population, as indicated by United Nations reports. The country’s political landscape, marred by accusations of corruption and ineffectiveness, has seen politicians failing to implement economic rescue measures or to elect a new head of state. For over a year, Lebanon has been operating under a caretaker government with limited authority and without a president, as lawmakers have been unsuccessful in electing a new leader.