How did the war reshape the GDP in 2026?

Reaching a gross domestic product (GDP) level of $53 billion, as it stood in 2019, is no longer a goal that can be achieved solely through reforms or by reducing the fiscal deficit and inflation. It has instead become tied to the war, its fluctuations, a 10-day ceasefire, and the possibility of a permanent halt. On one hand, the economy is weighed down by a fragile system that has yet to recover; on the other, it faces global inflation driven by rising oil prices, coinciding with the onset of the Israeli-American war on Iran on 28 February. How will this affect Lebanon’s expected GDP in 2026?

GDP in Lebanon is not treated as a single fixed figure; rather, it is divided into 2 components: a nominal GDP calculated according to traditional statistical standards, and a real GDP that reflects the actual size of the cash-based economy operating largely outside official channels. This disparity in Lebanon stems from deep structural imbalances, most notably the expansion of partial dollarization, as well as the significant decline in the accuracy and reliability of official statistics.

According to the latest report issued by the Central Administration of Statistics last week, Lebanon’s nominal GDP for 2024 was estimated at $30.5 billion, up from $25.9 billion in 2023. Despite this increase, the 2024 level still represents only about 57% of its 2019 level of $53.3 billion.

In real terms, GDP at constant prices contracted by 5.2% in 2024, following a slight decline of 0.5% in 2023 and modest growth of 1.4% in 2022. The report estimates that real GDP in 2024 amounts to roughly 69% of its 2019 level, reflecting the harsh economic conditions Lebanon has experienced since then, including the prolonged economic crisis and subsequent shocks. As for the trade deficit, it accounted for about 42% of nominal GDP.

In 2024, which witnessed, in its final 2 months, a full-scale war on Lebanon following its “support of Gaza” in the Israeli war, the Central Administration of Statistics estimated the gross national income at approximately 2,708 trillion Lebanese pounds ($30.3 billion), while gross national disposable income reached 3,268 trillion pounds ($36.5 billion) at current prices. Disposable national income exceeds GDP in Lebanon, primarily due to the inclusion of remittances from Lebanese abroad and other current transfers.

The economy in 2025

For 2025, although no official figures have been issued by the Central Administration of Statistics, the Ministry of Economy and Trade estimated economic growth at 5%, while the World Bank estimated it at 3.7%. This implies that nominal GDP in 2025 should reach $32.5 billion. If inflation is calculated at 12% alongside 5% growth, “the estimated real GDP,” as explained by economist and member of the Economic and Social Council Anis Bou Diab to Nidaa Al Watan, “would reach $37 billion in 2025.” What, then, are the projections for 2026?

GDP in 2026

While early-year estimates suggested that the Lebanese economy would continue to grow, the “support of Iran” war launched from Lebanese territory altered the equation, effectively bringing the war onto Lebanese soil. As a result, the war’s impact on GDP, according to economic and financial expert Nicolas Shekhani, constitutes “a structural collapse rather than merely a continuation of decline.”

He added: “The conflict has spread to multiple regions in Lebanon, resulting in more than one million displaced persons. Commercial activity in many areas has shifted from contraction to near-total paralysis, while formal private sector activity has sharply declined by around 50% across industry, agriculture, and services. The hospitality sector has been the hardest hit, with hotel and restaurant activity dropping by approximately 80%. Unemployment is expected to exceed 45%, with an additional 250,000 jobs at risk. These disruptions translate into monthly revenue losses estimated at around $2 billion. By the end of the year, Lebanon’s GDP is expected to contract by about 10%, adding to the decline recorded in 2024.”

In general, 2 scenarios had been put before the 10-day ceasefire came into effect at midnight Thursday:

The first: if the U.S.-Israeli war on Iran ends after lasting two months.

The second: if it stops abroad but continues in Lebanon after the ceasefire.

First scenario

In the first scenario, GDP in 2026 will be influenced by global inflation. Every $10 increase in the global price of a barrel of oil raises global inflation by 0.4% and reduces economic growth by between 0.1% and 0.2%. According to Bou Diab, “if rising inflation is added to economic contraction, this would result in a 5% economic decline. But how would this translate numerically?”

Inflation is expected to rise by 2%, given Lebanon’s 100% reliance on imported petroleum products and a 30% increase in oil prices.

With estimated inflation of 14% in the previous year, plus an additional 4-5% increase in local prices, alongside imported inflation and price transmission to other goods, total inflation could range between 25% and 30%. This would be reflected in nominal GDP, which is expected to reach between $36 and $37 billion due to inflation; thus failing to reflect the actual state of the real economy.

As for real economic contraction, if the ceasefire holds and the war does not exceed two months, contraction could reach 7%, according to World Bank estimates, alongside inflation of 25-30%.

Second scenario: War resumes after the truce

If the war does not end and resumes after the ceasefire, continuing for several more months in Lebanon and Iran, the situation would become catastrophic. GDP would be affected differently, leading to stagflation; a sharp rise in prices coupled with a severe decline in demand, resulting in economic stagnation and a significant contraction in the real economy. Lebanon could witness a scenario similar to the 2019 crisis, with GDP falling to between $16 and $18 billion.

In 2024, Bou Diab noted that “direct and indirect losses reached $14 billion. We have not seen any support except for a $250 million World Bank loan for electricity and infrastructure reconstruction. Thus, we have not yet recovered from the losses of the Gaza support war, and now we are adding the losses of the 2026 war. All 2024 figures do not indicate recovery in 2025; rather, there is fragile growth not built on the real economy.”

According to the Central Administration of Statistics report, consumption spending reached 120% of GDP, while remittances from expatriates accounted for 6.2%, indicating the absence of a domestic economy and the presence instead of an externally driven one. If external conditions deteriorate, the impact is transmitted inside, especially as Lebanon is already weakened by war.

The path to a $53 Billion GDP

Under both scenarios, the most effective solution remains a permanent end to the war and agreement on this point during negotiations. This would pave the way for a better future free of weapons and conflict, enabling the implementation of reforms, the inflow of investments, the return of tourists, the reopening of factories, and the creation of job opportunities. Such developments would help curb stagnation and inflation, allowing the economy to recover toward pre-crisis GDP levels.