Lebanon economy to shrink 6.4%, World Bank says

The World Bank projected that Lebanon's economy will contract by 6.4% in 2026, saying the latest Israel-Hezbollah war has disrupted a recovery from the country's financial crisis.

In a report, the bank said real GDP was expected to fall because of a collapse in tourism, weaker consumption, disrupted supply chains, heightened insecurity and prolonged displacement. It also forecast inflation of 17.5% this year.

Lebanon has been in a financial crisis since 2019. The World Bank said the economy had strengthened before the latest conflict, estimating real GDP growth of 4.2% in 2025, which it described as the fastest since the start of that crisis.

Lebanese authorities say more than 4,300 people have been killed after Hezbollah attacked Israel in March and Israel responded with an air campaign and ground invasion.

Dahlia Khalifa, the World Bank's Middle East director, said banking sector restructuring and fiscal management reforms would be critical to restoring confidence, protecting stability and raising financing for reconstruction and recovery.

The international community has been pressing Lebanon to enact financial reforms to unlock economic aid. Parliament passed amendments to a bank resolution law last week aimed at restructuring troubled banks and addressing the banking crisis. The International Monetary Fund welcomed the law and said it would resume meetings in Beirut next month.