The disappearance of Lebanon’s middle class

For decades, Lebanon’s middle class underpinned the country’s economic resilience and civic life, anchoring consumption, education, professional labor, and small business activity while sustaining family networks through remittances from abroad. That class has now been largely dismantled. According to the World Bank, Lebanon is experiencing one of the most severe economic crises globally since the mid-19th century, driven by the collapse of its financial system, a prolonged currency freefall, and the erosion of real incomes.

Once categorized as an upper-middle-income economy, Lebanon has since been downgraded as poverty more than tripled over the past decade, reaching 44 percent of the population by 2022. Assessments by the International Monetary Fund and the United Nations ESCWA show that inflation, wage compression, and the paralysis of the banking sector have pushed millions of households once considered economically secure into vulnerability. What is unfolding is not simply an economic contraction, but the hollowing out of a social class that long served as Lebanon’s stabilizing core, leaving behind a sharply polarized society and an increasingly fragile state.

Two middle classes, one fragile system

Few observers explain this trajectory with greater clarity than Nicolas Chikhani, a finance professor at Saint Joseph University and former chief executive of Arab Bank Switzerland. In an interview with The Beiruter, Chikhani described Lebanon’s former middle class as comprising two distinct groups whose fortunes were ultimately bound to the banking system.

The first consisted of expatriate professionals engineers, doctors, lawyers, and other skilled workers who earned stable incomes in the Gulf, Europe, and the United States and regularly transferred their savings home in U.S. dollars.

The second included those living and working inside Lebanon: salaried professionals and owners of small- and medium-sized enterprises (SMEs) who depended on the domestic economy’s ability to expand, hire, and invest. Both groups, Chikhani explained, “were slowly building their wealth through deposits that earned interest, as they prepared for retirement and supported their families.”

Warning signs before the fall

While 2019 is often treated as the moment of sudden collapse, the unraveling began years earlier. In the period preceding the breakdown of the banking sector, Lebanon’s economy was heavily exposed to Syria. When the Syrian war erupted in 2011, Lebanese small- and medium-sized enterprises (SMEs) suffered immediate setbacks. According to estimates by the World Bank, the influx of Syrians fleeing the conflict cost Lebanon between $4 billion and $5 billion annually.

As Chikhani stressed, however, this shock was not the decisive factor behind the collapse of the middle class. The fatal blow came later, as a result of deliberate domestic policy choices.

Engineering the collapse

Beginning in 2016, the Central Bank introduced financial-engineering schemes that offered banks unusually high returns on fresh dollar inflows. In response, lenders raised interest rates on deposits while sharply increasing borrowing costs. Mortgages became unaffordable, and SMEs the primary employers of the middle class scaled back operations, halted expansion, and froze hiring.

As real investment contracted, Lebanon shifted into what Chikhani described as a “liquidity-based economy,” one sustained by cash circulation rather than productive growth.

A shrinking social base

The World Bank’s Poverty and Equity Assessment (2024) illustrates the scale of the deterioration. Over just more than a decade, Lebanon’s middle class shrank from 35 percent to roughly 18 percent of the population, while the affluent class was reduced by half. At the same time, the share of households classified as “vulnerable to falling into poverty” expanded sharply, with nearly one in every two non-poor individuals now at risk due to volatile and declining consumption.

The true breaking point came in late 2019, when what Chikhani described as “the ponzi scheme” collapsed. As confidence evaporated, a mass bank run followed, exposing the banks’ inability to return deposits. Most funds had been placed at the Central Bank or diverted to finance government debt and were no longer liquid.

Expatriates lost retirement savings built over decades, while domestic professionals and SME owners saw their operational cash disappear. “Overnight, everyone who constituted the middle class found their economy inaccessible,” Chikhani said.

Inflation and informal survival

Inflation then erased what little remained. With the Lebanese pound losing 98 percent of its value and consumption of basic food items such as meat, dairy, and vegetables falling sharply, even previously stable earners slid into acute food insecurity.

Lebanon’s latest IPC analysis (December 2025) shows nearly 900,000 people facing acute food insecurity, including almost half a million Lebanese residents many of them former middle-class earners whose salaries no longer cover basic expenses.

By 2022, the economic order had fundamentally reorganized itself. Businesses that once operated formally shifted into cash-based informality. “Lebanon became one of the biggest cash economies in the world,” Chikhani noted. While dollar cash insulated a small elite, the expansion of an untaxed, unregulated parallel economy further weakened the state.

The Financial Action Task Force eventually grey-listed Lebanon, citing money-laundering and financial-governance risks a designation that has further constrained prospects for recovery.

A social structure undone

The disappearance of Lebanon’s middle class is not an abstract economic trend. It marks the dismantling of a social structure that once anchored the country’s economic life and civic stability. Reversing that decline will require more than macroeconomic stabilization or modest gains in purchasing power. It will require the restoration of trust, comprehensive reform of the financial sector, and the revival of a formal, productive private economy.

Until those conditions are met, the middle class that once carried Lebanon forward will continue to shrink along with the economic and civic stability the country can no longer afford to lose.