Lebanon’s economy is projected to grow by 4.7% in 2025, fueled by anticipated progress on reforms, a rebound in tourism and household consumption, and modest capital inflows, the World Bank said on Thursday in its latest Lebanon Economic Monitor (LEM).

However, the outlook remains clouded by political fragility and a protracted financial crisis that continues to deter large-scale investments.

The Spring 2025 edition of the LEM, titled “Turning the Tide?”, marks a stark revision of the country’s 2024 economic trajectory. Lebanon’s real GDP is now estimated to have contracted by 7.1% last year, deeper than the 5.7% decline previously forecast in Fall 2024, bringing the total economic contraction since 2019 to nearly 40%.

Despite the grim backdrop, the World Bank sees signs of cautious optimism. Inflation is expected to ease to 15.2% in 2025, assuming the Lebanese lira remains stable and global price pressures continue to cool. Meanwhile, better revenue collection and a balanced state budget could allow for a slight increase in public spending on essential services. Still, the report warns that elevated fiscal stress will persist unless Lebanon undertakes comprehensive structural reforms.

“Recent political developments brought a renewed momentum and offer an opportunity to address the fundamentals of Lebanon’s overlapping financial, economic, and institutional crises,” said Jean-Christophe Carret, World Bank Middle East Division Director. “By prioritizing actionable, high-impact measures, Lebanon can tackle critical issues and move toward sustainable recovery.”

The report also analyzes the risks posed by rising global trade uncertainty. Although direct impacts on Lebanon remain limited—exports to major trading partners represent just 4% of total goods exports—the indirect effects could be more severe depending on how shifting global dynamics influence inflation, investment, and economic activity more broadly.

In addition, the LEM includes in-depth assessments of inflation trends and real effective exchange rate movements. It finds that while Lebanon’s inflation largely mirrored global trends prior to the crisis, it has since been driven predominantly by exchange rate depreciation. With increased dollarization and a more stable currency, inflation could return to pre-crisis dynamics but is likely to remain elevated compared to global averages due to lingering domestic vulnerabilities.

On the currency front, the real effective exchange rate has sharply depreciated since 2019, yet this has not translated into stronger export growth—mainly because of structural constraints and Lebanon’s dollarized economy.

A dedicated “Special Focus” section of the report presents a detailed one-year action plan designed to guide the government’s reform agenda. Drawing on over two decades of World Bank engagement in Lebanon, the plan outlines a series of practical, high-impact steps that can be implemented within the current government’s limited mandate. The proposed measures focus on restoring macro-financial stability, rebuilding public trust in state institutions, and laying the groundwork for a resilient and inclusive economic model.