Lebanon’s Central Bank last week released its first-ever comprehensive Macroeconomic Review, offering a detailed snapshot of the country’s economy after years of financial collapse and a devastating war. The report, published under Governor Karim Souaid, is designed to serve as a reference for markets, regulators, banks, policymakers, and the public.

Compiled over two months by a team of around 30 staff in the Central Bank’s Statistics and Research Center, the 44-page report provides a synthetic indicator summarizing Lebanon’s economic situation. The review will be published biannually and focuses on the real sector rather than public finance or sovereign debt. Technical guidance was provided by the International Monetary Fund, which endorsed the methodology.

Signs of Recovery and Stabilization

The review highlights early signs of recovery in the first half of 2025. Lebanon’s gross domestic product (GDP), which contracted by 6.4 percent in 2024, is expected to return to modest growth this year, supported by political stabilization, tourism, and domestic consumption. The report credits institutional developments – including the election of a new president, formation of a government, and appointment of a Central Bank governor – with restoring confidence, reducing uncertainty, and reactivating public institutions.

Indicators suggest incremental improvement: cement deliveries rose 39 percent in the first half of 2025, customs revenues more than doubled, and passenger arrivals at Beirut airport increased by 3.4 percent. Tourism, which generated $4.7 billion in revenue in 2024, is expected to strengthen further following the lifting of some Gulf travel restrictions.

Inflation has eased significantly, with headline consumer prices rising 15 percent year-on-year in June, down from 42 percent a year earlier. Core inflation remains high at 16.4 percent, reflecting persistent domestic price pressures. The Central Bank attributed the moderation to exchange-rate stability around LL89,500/USD, tighter fiscal and monetary policies, and the continued dollarization of transactions.

Banking Sector Struggles

The report underscored the continued fragility of Lebanon’s banking sector. Since 2019, commercial bank balance sheets have shrunk by nearly 60 percent, lending has dropped to $553 million, and branch networks have contracted by 40 percent. Meanwhile, para-banking institutions and cash-based financial operations have expanded rapidly, signaling a structural shift in financial intermediation.

In the absence of a credible government recovery plan, the Central Bank has prioritized depositor protection, stabilized the banking sector, and mitigated volatility in the Lebanese pound through a series of measures, including phased withdrawals of U.S. dollar deposits.

External Sector and Reserves

On the external front, the current account deficit narrowed slightly to $5.6 billion in 2024 from $5.9 billion in 2023, supported by $5 billion in net remittances. Central Bank foreign currency reserves rose to $11.3 billion by mid-2025, excluding gold, while gold reserves surged 41 percent year-on-year to $30.28 billion, driven by rising global prices.

Following Lebanon’s grey-listing by the Financial Action Task Force in October 2024, the Central Bank coordinated with the Special Investigation Commission to implement stricter anti-money laundering and counter-terrorism financing measures, aiming to restore confidence in the financial system.

Reforms and Legislative Progress

The report also highlighted progress on financial reforms, including amendments to the banking secrecy law and advancement of bank restructuring legislation. Authorities are moving forward on laws to address sector losses and strengthen transparency, aligning Lebanon’s financial system with international standards.

Outlook

Despite early signs of recovery, the report warned that Lebanon’s rebound remains fragile and heavily dependent on consumption and remittances. Persistent political and economic risks, coupled with structural vulnerabilities, pose challenges to sustained growth.

“Recent legislative momentum and institutional reforms signal a potential turning point,” the report said. “If these efforts continue and additional reforms are implemented in a timely manner, they could lay the foundations for a more durable and inclusive recovery.”