Lebanon Records 3.5% Economic Growth in 2025, Marking Fragile Turnaround After Years of Crisis

The report highlights notable progress on Lebanon’s reform agenda, including the passage of key economic and judicial legislation and important appointments within the civil service.

Lebanon’s economy returned to positive growth in 2025, signalling the early stages of a modest and fragile recovery following years of deep economic contraction, according to the latest World Bank Lebanon Economic Monitor (LEM).

The Winter 2025 edition of the report, titled “A Fragile Rebound,” estimates that real GDP expanded by 3.5% in 2025, reflecting tentative macroeconomic stabilisation, a rebound in tourism, and the effects of critical—though uneven—reform progress.

Reform Momentum Supports Stabilisation

The report highlights notable progress on Lebanon’s reform agenda, including the passage of key economic and judicial legislation and important appointments within the civil service. These developments have contributed to improved political and institutional stability after a prolonged period of paralysis.

However, the World Bank cautions that core structural reforms remain incomplete, particularly the long-delayed financial gap law and sector-specific reforms needed to restore confidence in the banking system and public finances.

“These reforms are essential to restoring macroeconomic and financial stability and to strengthening the effectiveness of sectoral reforms,” the report notes.

Jean-Christophe Carret, World Bank Middle East Division Director, said Lebanon’s recent growth underscores the importance of sustained reform momentum.

“Sustaining this fragile recovery will require swifter and more ambitious macro-financial and sectoral reforms to achieve lasting stability and inclusive growth,” he said.

Growth Revised Down Amid External Pressures

The LEM revised Lebanon’s 2025 growth estimate downward to 3.5%, from 4.7% projected in Spring 2025, citing a weaker-than-expected tourism season amid ongoing regional conflict, subdued private investment, and limited reconstruction spending due to persistent uncertainty.

Despite these constraints, the 2025 upturn was driven primarily by increased private consumption, supported by strong remittance inflows and widespread dollarisation of wages. Tourism activity, along with renewed momentum in real estate and construction, also contributed to growth.

Exchange Rate Stability and Fiscal Improvement

Exchange rate stability has been maintained since August 2023, supported by improved tax compliance and prudent fiscal management. As a result, Lebanon’s debt-to-GDP ratio is projected to decline in 2025, largely due to higher nominal GDP growth.

Nevertheless, public debt remains elevated and Lebanon continues to lack access to international capital markets.

The fiscal balance is expected to move into surplus territory on a cash basis, though the World Bank stressed the need for further improvements in revenue mobilisation and the introduction of more progressive taxation measures.

Inflation Easing After Years of Volatility

Headline inflation is projected to decline to 15.2% in 2025, with inflation expected to reach single digits in 2026 for the first time since 2019. The easing inflation trend reflects exchange rate stabilisation and the near-complete dollarisation of consumer prices.

However, price pressures persist in domestically driven service sectors, including housing rents and education, limiting the relief felt by many households.

Outlook: Cautious Optimism Amid Significant Risks

Looking ahead, the World Bank projects that Lebanon’s economic recovery could continue, with real GDP growth forecast at 4% in 2026, provided reform efforts are sustained, modest reconstruction inflows materialise, and political stability holds.

Remittances and tourism are expected to remain the economy’s primary growth engines. However, the outlook remains highly fragile, with significant downside risks stemming from delays in implementing critical reforms, continued weakness in investment, and ongoing regional instability.

The report concludes that while Lebanon’s return to growth represents a positive turning point, the recovery remains vulnerable and dependent on decisive policy action to translate short-term stabilisation into durable and inclusive economic growth.