The national economy will face numerous challenges in 2025, with the key to addressing them is the election of a new President of the Lebanese Republic. It has become clear to all that resolving the economic crises is unattainable without first addressing the presidential impasse, followed by forming a reformist government capable of implementing the necessary reforms to establish a roadmap for economic recovery.

Undoubtedly, Lebanon's national economy has been a victim of political factors that have manipulated and crippled it, dragging it to the lowest global ranks. The gross domestic product (GDP) plummeted from $55 billion to $18 billion, and further down to $15 billion before the ceasefire was declared between Lebanon and Israel, as the war inflicted the final blow to what remained of the economy.

According to a report issued by the World Bank assessing the initial impact of the conflict on Lebanon's economy and its key sectors, the material damage and economic losses amounted to approximately $8.5 billion. The report concluded that physical damages alone reached $3.4 billion, while economic losses totaled $5.1 billion.

On the economic growth front, estimates suggest that the conflict reduced Lebanon’s real GDP growth by at least 6.6% in 2024. This exacerbates an ongoing economic contraction that has persisted for five years, resulting in a cumulative shrinkage exceeding 34% of real GDP.

The Lebanese economy contracted by 0.8% in 2023, 0.6% in 2022, and a sharp 7.0% in 2021, with projections indicating a further contraction of 1.0% in 2024. The World Bank noted that the economic downturn was anticipated to bottom out in 2023 after five years of severe contraction, which collectively amounted to 34%.

However, the escalation of military conflict in the last quarter of 2023 further exacerbated the situation, resulting in a negative growth rate of 0.8%. This adverse impact persisted throughout 2024, with an additional contraction of 1.0% expected before the significant escalation in September 2024. The report highlighted that the tourism sector, one of the remaining pillars of the Lebanese economy, bore the brunt of the conflict.

The economy has suffered extensive losses, and the greatest challenge lies in recovering what has been lost. Achieving this recovery requires, first, a reformist government, second, a comprehensive roadmap for revival, and third, the collective effort of all stakeholders, particularly the private sector, which has once again proven to be the backbone of the economy, remaining resilient despite successive blows.

On the fiscal front, a surplus in public finances is expected to continue in 2024 at 0.2% of GDP. While the 2024 budget forecasts a zero-deficit balance, the World Bank projects that government revenues will surpass expectations due to improved tax collection, resulting in a total surplus of 0.2% of GDP.

This improvement followed a pivotal decision by Acting Central Bank Governor Wassim Mansouri to cease lending to the state and revise taxes and fees, creating a financial surplus redirected toward mitigating the war’s repercussions, including the displacement of Lebanese citizens. Additionally, the Governor maintained exchange rate stability at 89,500 Lebanese pounds per US dollar since mid-2023, driven by increased fiscal revenues and reduced reliance on Central Bank financing for the budget. This led to a 31.2% contraction in the circulating money supply in Lebanese pounds. Concurrently, the Central Bank's measures boosted reserves to $10.137 billion, despite funds distributed under Circulars 158 and 166.

The most pressing monetary challenge will be to sustain exchange rate stability and potentially reduce it below the current fixed level.

Another critical issue facing Lebanon, particularly the government, is reinstating the country on the global financial map by lifting financial restrictions, removing Lebanon from the Financial Action Task Force’s gray list, and returning it to its former standing. This requires implementing reforms demanded by the International Monetary Fund and the international community.

Additionally, a long-standing issue remains unresolved: the fate of frozen bank deposits, which has affected a significant segment of the Lebanese population. Resolving this matter is imperative as it constitutes a mandatory step toward restructuring the banking sector, a priority for 2025.

The year 2025 is poised to bring significant challenges. Will it witness further losses and regression, or will it mark the beginning of a roadmap toward economic recovery? The critical starting point remains political solutions, foremost of which is the election of a new President of the Republic.