The Israeli war on Lebanon, which escalated in the third quarter of 2024, represents a significant turning point in the contemporary history of Lebanon. The country has been suffering for years under a crippling economic crisis, and the conflict has exacerbated the already difficult living and economic conditions that the Lebanese people have been facing. This war deepens the economic losses and worsens the already dire situation, as the Lebanese economy has witnessed years of declining GDP and rising unemployment rates, the destruction of essential infrastructure such as roads, hospitals, and schools, and an increase in the suffering of the population.
The main activities producing Lebanon’s GDP are concentrated in the service sectors, with tourism, banking, and real estate being the most prominent. The service sector contributes about 70% of GDP, followed by agriculture and industry. However, these sectors face significant challenges due to economic contraction and rampant corruption, leading to a decline in investments and economic growth. Regarding Lebanon’s foreign currency sources, remittances from expatriates are one of the most critical, constituting a large portion of national income, while tourism also plays a significant role in providing foreign currency.
Sequential Crises
The Lebanese economy suffers from multiple crises that have profoundly affected its performance over the past decade. These crises have led to a significant decline in GDP. Before the economic crisis began in 2019, Lebanon’s GDP was around $52 billion; however, by 2021, it had dropped to approximately $23.1 billion, reflecting a sharp contraction of over 50% in just two years. Several reasons exist for this drop, but among the main factors is the financial and banking crisis that occurred in late 2019 when the Lebanese banking system collapsed due to the accumulation of public debt and the inability to meet state obligations.
This led Lebanese banks to impose severe restrictions on withdrawals and transfers in foreign currencies, resulting in the freezing of customer deposits and destroying trust in the banking sector, which prompted Lebanon’s central bank to decide to raise interest rates, further deteriorating the financial situation in the country. The decline in banking conditions and restrictions on currency withdrawals has reduced remittances from expatriates, which the Lebanese economy heavily relies on. Another major factor was the Beirut port explosion in August 2020, which destroyed critical infrastructure in the capital and caused massive financial and economic losses, with the World Bank estimating the economic losses from the explosion at around $8 billion. This further deepened the economic crisis and exacerbated the contraction. The COVID-19 pandemic then came to devastate what little remained of Lebanon’s fragile economy, stopping vital sectors like tourism and services, leading to a significant drop in economic revenues.
These economic conditions have adversely affected the social and economic circumstances of the citizens in Lebanon, who number about 6 million and live in densely populated urban areas such as Beirut and Tripoli. Estimates suggest that more than 70% of the population lives below the poverty line amid the current crises, as the economic crisis impacts the daily lives of Lebanese citizens, marked by a rise in unemployment rates, estimated at around 29.6% in 2022, putting additional pressure on the economy and society under these conditions.
As for Southern Lebanon, which is under Israeli fire, it stretches from the Litani River to the border with Israel in the south and includes agricultural and residential areas, in addition to essential infrastructure. About 1.5 million people live in this region in several major cities such as Sidon, Tyre, Nabatieh, and Marjeyoun, along with dozens of small towns and villages. The number of towns in the southern governorate is around 160. This region covers a geographic area of about 3,900 square kilometers, and its inhabitants primarily rely on agriculture, with olive, citrus, and grape production being prominent trades. The south also possesses important natural resources, including forests and fertile agricultural lands, which contribute to local agricultural activity. Southern Lebanon has a road network extending over 500 kilometers, facilitating travel between the various towns. It also contains several schools, hospitals, and government services, with estimates indicating about 150 schools and 30 hospitals. Shiites make up about 67% of the population, while Sunnis and Christians represent 13% and 20%, respectively. The city of Sidon, the capital of the south, is one of the largest cities after Beirut and Tripoli.
Development of Key Economic Indicators
Over the past five years, the Lebanese economy has faced severe deterioration due to several internal and external factors. In 2020, GDP declined by 21.4% due to political and financial crises, along with the deteriorating social conditions stemming from the large explosion at the Beirut port in August 2020, which directly impacted the national economy. As pressures increased, the inflation rate reached unprecedented levels, hitting 150% in 2021 and 241.4% in 2022, eroding citizens’ purchasing power and sharply decreasing the value of the Lebanese pound; the dollar rose from 1,507 pounds in 2019 to 100,000 pounds in 2023, complicating the economic situation and leading to widespread poverty.
Despite these challenges, some indicators showed slight improvement in 2021, as tourism revenues began to recover after a significant drop during the COVID-19 pandemic. However, these revenues did not return to pre-crisis levels. Remittances from workers abroad also declined, dropping from $7.8 billion in 2019 to $5 billion in 2023, reflecting increasing pressures on Lebanese families. As a result, the Lebanese economy has suffered from unprecedented financial crises and rising inflation and unemployment rates.
According to data from a UN report published in news outlets, the Lebanese economy was expected to recover in 2024, growing by 1.7% that year, followed by a growth rate of 3.8% in 2025. However, these estimates came before the war launched by Israel against Southern Lebanon, which has destroyed a large part of the infrastructure and caused a disruption to essential services, damaging roads and bridges, disrupting trade and transport, and paralyzing economic and agricultural activities. Additionally, targeting industrial facilities and vital installations has deepened the crisis, leading to increased unemployment and depriving thousands of families of their livelihoods. Furthermore, the Lebanese economy is now suffering from increased debt and fiscal deficits due to reconstruction needs, which will intensify the existing economic crisis and lead to greater dependence on international assistance. Preliminary estimates for the Israeli attacks on Lebanon suggest losses of around $1.5 billion, which could lead to a new humanitarian disaster akin to the humanitarian catastrophe in Gaza, necessitating international intervention to halt the war and move towards diplomatic negotiations.
Lebanon’s already fragile economy is currently enduring continuous Israeli bombardments in southern Lebanon, causing destruction of infrastructure such as roads, bridges, and public facilities, as well as the devastation of agricultural lands that a large number of southern residents rely on for their livelihoods, obstructing internal and external trade routes. Mass internal displacement has put pressure on local resources due to an increase in the number of people in safe areas, depleting local resources such as water, food, and health services, not to mention the rising prices caused by this pressure alongside the burden of providing humanitarian assistance. On the other hand, with the increasing number of displaced persons, the government faces significant challenges in providing essential services such as education and healthcare, which affects the quality of available education and healthcare. Additionally, there are profound psychological and social effects on the population, leading to increased rates of anxiety and depression among both displaced persons and residents, which can affect future economic productivity.
Regarding the reconstruction costs, estimates indicate that rebuilding Southern Lebanon will cost about $15 billion, encompassing expenses related to reconstructing roads, bridges, and public facilities, requiring substantial investments and a long time that may extend for several years; this will influence long-term economic growth. Within this context, compensating affected residents due to the war, whether through financial support or housing assistance, will be an essential part of the reconstruction costs. The Lebanese government will require international support for this reconstruction, necessitating improved diplomatic relations and a commitment to structural economic reforms to achieve that, which would significantly impact the economic and social conditions of the citizens in Lebanon.
[1] Lebanon’s Fragile Economy Pulled Back into Recession (worldbank.org)
[2] Lebanon’s Fragile Economy Pulled Back into Recession (worldbank.org)
