Lebanon war to depress GDP by up to 16%

The conflict in Lebanon is likely to depress its GDP by 12-16 percent this year, while a surge in its energy import bill will aggravate its current account deficit, a Western finance group has predicted.

The conflict, an offshoot of the Iran war, has already damaged Lebanon’s infrastructure and sharply depressed tourism, the country’s main source of foreign exchange, the Washington-based Institute of International Finance (IIF) said in a report.

“Besides the damage to tourism, agriculture and manufacturing, especially in conflict-affected regions, face supply-chain disruptions, damaged farmland, and reduced labour mobility, further constraining output and broadening the contraction across the economy,” the report added.

A sharp rise in global oil and natural gas prices will also significantly increase Lebanon’s import bill, as petroleum products account for nearly one quarter of total imports, the IIF said.

“Conflict-induced disruptions to economic activity will weigh heavily on goods exports and tourism receipts, further deteriorating external balances…consequently, the current account deficit is projected to widen from an estimated 14 percent of GDP in 2025 to around 17 percent of GDP in 2026,” it said.

In comments published last week by Dubai-based Erem Business news, Lebanese minister of state for technology and artificial intelligence Kamal Shehadeh said the conflict has so far caused direct and indirect economic losses of about $4 billion.

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