Lebanon’s economy returned to positive growth in 2025, marking the start of a modest and fragile recovery after years of severe contraction, the World Bank said in its latest Lebanon Economic Monitor (LEM).

According to the Winter 2025 edition of the report, titled “A Fragile Rebound,” real gross domestic product expanded by 3.5% in 2025, reflecting early signs of macroeconomic stabilization, a rebound in tourism and the effects of crucial—though uneven—reform progress.

The World Bank said the recovery was supported by increased private consumption, driven by strong remittance inflows and the greater dollarization of wages, as well as renewed activity in real estate and construction. Tourism also played a key role, despite a weaker-than-expected season amid ongoing regional conflict.

“Lebanon’s recent economic gain underscores the importance of ongoing reforms,” said Jean-Christophe Carret, the World Bank’s Middle East Division Director. “Sustaining this fragile recovery will require pursuing swifter and more ambitious macro-financial and sectoral reforms to achieve lasting stability and inclusive growth.”

The LEM revised Lebanon’s 2025 growth estimate downward to 3.5% from a previous projection of 4.7% in Spring 2025, citing subdued investment, limited reconstruction spending due to uncertainty, and a softer tourism season.

The report highlighted progress on Lebanon’s reform agenda, including the passage of key economic and judicial laws and important civil service appointments, which have contributed to greater political and institutional stabilization. However, the World Bank warned that critical structural reforms remain pending, notably the long-delayed “financial gap law” and major sector reforms.

“These reforms are crucial for Lebanon to restore macroeconomic and financial stability and strengthen the impact and effectiveness of sectoral reforms,” the report said.

Exchange rate stability has held since August 2023, supported by improved tax compliance and prudent fiscal management. The World Bank projected that Lebanon’s debt-to-GDP ratio will decline in 2025 due to higher nominal GDP, although public debt remains elevated and the country is still shut out of international capital markets.

The fiscal balance is expected to move into surplus territory on a cash basis, but the report stressed that revenue mobilization and progressive taxation still require further strengthening.

Headline inflation is projected to fall to 15.2% in 2025 and to reach single digits in 2026 for the first time since 2019. The World Bank attributed the decline to exchange rate stabilization and the near-complete dollarization of consumer prices, while noting persistent inflation in domestic service sectors such as rent and education.

Looking ahead, the World Bank forecast that Lebanon’s economic momentum will continue, with real GDP growth projected at 4% in 2026, provided reform efforts persist, modest reconstruction inflows materialize and political stability is maintained.

Remittances and tourism are expected to remain critical growth drivers. However, the report warned that delays in implementing key reforms and ongoing regional instability pose significant risks that could derail the country’s fragile recovery.