Lebanon 2025: Neither recovery nor collapse

After more than five years of economic collapse, Lebanon did not return to growth in 2025. Yet the year marked a quiet turning point: inflation slowed sharply, monetary stability remained fragile but intact, the economy continued to function without banks, and the Gap Law was adopted in December, officially acknowledging more than $70 billion in financial losses. It was a year of transition, without miracles, but with the first signs of realism.

Entering 2025 with a GDP reduced by more than 40% since 2019, a banking system effectively bankrupt, and over 70% of the population impoverished, Lebanon had no room left for illusion. The economy held up not through recovery, but through adaptation: widespread dollarization, informal economic activity, diaspora remittances, and a tourism season acting as shock absorbers.

With real growth stuck at 1–2% and no revival of credit, 2025 did not repair the economy. But it did mark a critical milestone: 2025 will be remembered as the year Lebanon stopped surviving without numbers and began cautiously to rebuild with facts.

Fragile stability, an economy on life support

In 2025, the Lebanese pound remained broadly stable, hovering around LBP 89,000–90,000 per dollar, supported by an economy where more than 80% of transactions are dollarized and where cash dominates.

Inflation, which had exceeded 170% in 2022, fell below 40% year-on-year, offering households a modest respite without restoring purchasing power still down by more than 90% since the onset of the crisis.

The banking sector remained paralyzed: no meaningful productive credit to the economy, deposits still frozen, losses estimated between $65 and $72 billion, and financial intermediation virtually nonexistent. The economy continues to function despite the banks, not because of them.

Real activity, but no leverage

By spring, the reality was clear: economic activity exists, but it is fragmented and weakly productive. Nominal GDP is estimated at $23–25 billion, down from more than $52 billion in 2018. Trade, local services and certain light industries maintained minimal levels of activity, largely within the informal sector.

Diaspora remittances, estimated at $6.5–7 billion over the year, continued to act as a form of social transfusion essential for consumption, but insufficient to finance investment.

Summer as an economic shock absorber

Between July and September, tourism played a stabilizing role. Seasonal foreign currency inflows are estimated at $5–6 billion, supporting consumption, hospitality and services.

Yet behind this seasonal breathing space, structural weaknesses remained fully intact: near-zero investment (less than 8% of GDP), deteriorating infrastructure, ongoing brain drain, and a complete absence of long-term credit.

The autumn of financial realism

From October onwards, economic debate refocused on financial restructuring. For the first time, official recognition of banking-sector losses was no longer avoided. A consensus gradually emerged around a core reality: without acknowledging losses, no credible reform is possible.

In December, the adoption of the Gap Law marked a symbolic and institutional rupture. The law does not reimburse depositors. It does not restart credit. It does not close the deficit. But it officially recognizes a financial hole estimated at over $70 billion and establishes a legal framework for loss allocation, an essential prerequisite for any serious negotiations with the IMF and international partners.

2025 was not the year of recovery. Real growth remained weak, at around 1–2%, insufficient to absorb unemployment estimated at nearly 30% or to reverse poverty levels still affecting more than 70% of the population.

But the year did mark a shift: the end of denial.  An economy surviving through adaptation. A society holding together through remittances and resilience.

A state beginning, timidly, to assume responsibility. Everything now hinges on one rare factor in Lebanon: continuity. Without it, 2025 will remain just another parenthesis. With it, the year could become the starting point of a long, difficult, but finally credible, path forward.