The World Bank on Friday projected that Lebanon's economy would contract by 6.4 percent this year, as the latest Israel-Hezbollah war derailed the country's efforts at recovery. Lebanon has been dealing with an unprecedented financial crisis since 2019 and was still reeling from the 2024 Israel-Hezbollah war when the Iran-backed group drew it into the Middle East conflict by attacking Israel in March. Israel responded with a heavy air campaign and ground invasion that Lebanese authorities say have killed more than 4,300 people. Due to the war, "real GDP is projected to contract by 6.4 percent in 2026, reflecting the collapse in tourism, weaker consumption, disrupted supply chains, heightened insecurity, and prolonged displacement," the World Bank said in a report. Inflation is also expected to rise to 17.5 percent this year, according to the report. The World Bank said Lebanon's economy had strengthened before the latest conflict, with an estimated real GDP growth of 4.2 percent in 2025, "the fastest since the onset of the 2019 financial crisis". "Advancing reforms -- particularly on banking sector restructuring and fiscal management -- will be critical to restoring confidence, protecting stability, and mobilizing the financing needed for reconstruction and recovery," Dahlia Khalifa, the World Bank's Middle East director, said. The international community has been demanding that Lebanese authorities enact financial reforms in order to secure much-needed economic aid. Last week, parliament passed amendments to a bank resolution law aimed at restructuring troubled banks and addressing the country's banking crisis. The International Monetary Fund welcomed the law, describing it as "a very good step that reflects Lebanon's commitment to aligning its legislation with the best international practices". Lebanon has been in discussions with the IMF, which said it would resume its meetings in Beirut next month.
