Lebanon’s unemployment rate is expected to rise to 15.2% in 2026, up from 12.6% last year, while real GDP per capita is projected to fall by 7.2% and private consumption to contract by 6%, according to the World Bank’s latest Macro Poverty Outlook (MPO) report. The forecasts point to mounting pressure on workers and households in an economy still struggling to recover from its financial collapse, with the war erasing the limited recovery recorded in 2025. The World Bank also expects the employment-to-population ratio to decline from 41.4% to 40.2%. This means only about four in 10 working-age people will be employed, highlighting the severity of the labor market crisis. The strain extends beyond joblessness. Even those who have retained their jobs face rising living costs as prices and essential service bills climb. Economic contraction and falling consumption are further eroding households’ ability to maintain spending, particularly among those who have lost income or been displaced. The World Bank notes that living conditions were already fragile before the escalation of hostilities in March 2026 and have since deteriorated as households lost wages and productive assets. Many displaced families now rely on informal support networks and dwindling resources. Private consumption is expected to swing from 1.6% growth in 2025 to a 6% contraction this year, signaling weaker domestic demand and further pressure on businesses that depend on household spending. Real GDP per capita, which rose by 3.4% last year, is projected to decline by 7.2% in 2026. While the indicator does not directly measure wages, it reflects falling real economic output per person. Investment prospects are also deteriorating. After growing by 3.8% in 2025, fixed capital investment is forecast to contract by 5.4% this year. The decline threatens not only current economic activity but also future job creation and productivity, as businesses scale back plans to establish projects, expand operations or upgrade equipment. The downturn is expected to affect all major sectors. Services, which grew by 3.7% last year, are projected to contract by 7% in 2026, reflecting the impact of insecurity on tourism, trade and other services. Industry is forecast to shrink by 3.5%, while agriculture is expected to contract by 2.5%. The projections underscore the breadth of the crisis across sectors that generate output, employment and household income. As long as the authorities concentrate on raising revenue without tackling the causes of declining consumption, investment and employment, the negative economic trends are likely to persist and potentially worsen in the years ahead. Meanwhile, inflation continues to compound the pressure. Consumer prices rose by 17.3% year on year in the first half of 2026, and the World Bank expects average annual inflation to reach 17.5%. Electricity costs are a particular concern. Reduced fuel-based generation by state utility Électricité du Liban has forced households to absorb sharp increases in private generator prices, further eroding purchasing power and deepening the cost-of-living crisis. Lebanon’s energy import bill rose by 9% in the first seven months of 2026 to $3 billion, despite a 31% decline in imported volumes. The country is therefore paying more for less energy. Public finances present a different picture. The government recorded an overall fiscal surplus of about $1 billion through May 2026, equivalent to 2.5% of GDP. Revenues increased by 26.6%, supported by higher gasoline tax receipts. But a fiscal surplus does not necessarily signal better living conditions or a healthier labor market, particularly when consumption is contracting, unemployment is rising and essential services are becoming more expensive. The surplus measures the gap between public revenues and expenditure, not the economy’s capacity to create jobs or households’ ability to meet their needs. The government appears focused on increasing state revenues and controlling spending without developing clear economic and social policies. This approach was evident in the 2027 draft budget, which prioritized accounting considerations while offering little in the way of economic or social remedies. The World Bank’s bleak forecasts may therefore prove difficult to avoid. The draft budget points to a continuation of policies that have failed to address Lebanon’s structural weaknesses. As long as the authorities concentrate on raising revenue without tackling the causes of declining consumption, investment and employment, the negative economic trends are likely to persist and potentially worsen in the years ahead. This is an edited translation of a report originally published in Arabic.
