The price of war, the price of peace

Beyond politics and regional calculations, a harsher reality is emerging: Lebanon’s ongoing instability is carrying an increasingly heavy economic cost, reflected in nearly every major economic indicator. Beyond politics, a more pressing question emerges: what is the true economic cost of war, and what opportunities could peace unlock for Lebanon?

The Beiruter examines a new macroeconomic simulation prepared by the Levantine Center for Economic Policy and Strategic Research, which attempts to place concrete figures on Lebanon’s possible economic future between 2025 and 2035. Through a series of projections, the study maps how the Lebanese economy could evolve under different geopolitical scenarios, ranging from continued conflict to full regional normalization. The difference between the two paths is staggering: by 2035, the gap between war and peace could amount to $27.8 billion annually, nearly the equivalent of Lebanon’s entire current economy.

The model behind the projections

To estimate the economic impact of conflict versus long-term stability, the study relies on an economic simulation model that measures how security conditions influence growth, investment, tourism, foreign currency inflows and public finances. The projections incorporate a range of factors shaping Lebanon’s economy, including domestic and foreign investment, international aid, diaspora remittances, trade activity and tourism revenues, while also accounting for Lebanon’s historical difficulty in effectively utilizing external funding.

The model further assumes that improvements in political and security conditions would encourage a significant increase in foreign investment and economic activity. As for offshore gas, the study does not assume immediate revenues. Instead, it reflects the technical reality that exploration, development and production require several years before generating returns for the state, making any potential energy income a medium to long-term opportunity rather than an immediate solution.

An economy stuck in survival mode

Lebanon’s economy is currently estimated at approximately $30.6 billion, a sharp decline from the nearly $55 billion economy the country sustained before the 2019 financial collapse. Years of banking restrictions, inflation, political paralysis and recurring wars have transformed Lebanon from a regional services hub into an economy focused primarily on survival.

According to the study’s “Status Quo and Attrition” scenario, Lebanon’s economy is unlikely to experience meaningful recovery if current conditions persist. GDP is projected to decline further to around $27.5 billion by 2029 before stabilizing near $29 billion by 2035.

The GDP charts accompanying the study reflect this stagnation clearly. Under the conflict scenario, growth remains almost flat throughout the decade, illustrating an economy unable to generate enough momentum to reverse its collapse or rebuild productive sectors.

The financial picture becomes even more alarming when examining Lebanon’s foreign currency reserves. Banque du Liban currently holds reserves estimated at approximately $11.5 billion, funds that continue financing essential imports such as medicine, fuel and basic goods while preserving minimal exchange-rate stability. Yet under continued conflict, the study projects these reserves could decline to just $5.5 billion by 2035.

At that stage, Lebanon would effectively lose its remaining financial buffers. According to the report, reserves at that level would barely cover three weeks of essential imports.

The reserve charts show a continuous downward trajectory under conflict, reflecting an economy steadily exhausting its financial tools without generating sufficient foreign inflows capable of stabilizing the system.

The cost of risk

One of the study’s clearest conclusions is that Lebanon’s biggest economic obstacle is no longer only structural reform, but geopolitical risk.

Foreign direct investment into Lebanon has collapsed to approximately $250 million annually, most of it tied to diaspora real estate purchases rather than productive investments in infrastructure, industry or technology. International investors have largely withdrawn from Lebanon due to instability and the absence of long-term guarantees.

However, the study projects a dramatic shift under a credible peace agreement backed by international guarantees. In the full normalization scenario, foreign direct investment is projected to jump from $250 million to $3.5 billion in a single year, a fourteen-fold increase driven primarily by stability rather than internal reforms alone.

According to the report, this money is not theoretical. It is linked to reconstruction financing for the Port of Beirut and transport infrastructure, Gulf sovereign wealth investments in tourism and real estate, and diaspora capital potentially returning to a restructured banking system.

The investment charts reveal one of the fastest reactions in the entire study. Unlike tourism or gas revenues, which require years to recover, foreign direct investment surges almost immediately after stability is introduced. The graph displays a sharp upward spike beginning in the first year of normalization, highlighting how security remains the primary driver of capital entering Lebanon.

Tourism and trade under pressure

Lebanon historically built much of its prosperity on services, tourism, finance and trade. Today, these sectors remain heavily constrained by instability.

The study highlights that war-risk insurance premiums alone increase shipping costs for Lebanese exports by nearly 20%, significantly weakening the competitiveness of Lebanese products abroad. At the same time, instability along Lebanon’s southern border effectively cuts Lebanon off from one of its most profitable trade corridors toward Gulf, Syrian and Iraqi markets representing nearly 450 million consumers.

Tourism presents perhaps the clearest example of lost economic potential. Before Lebanon’s crises, tourism revenues reached approximately $8.2 billion annually, while Beirut’s hotels operated near full occupancy during peak seasons. Today, the sector survives largely on diaspora visits and limited regional tourism.

Under a full normalization scenario, Lebanese exports are projected to triple from $3.2 billion to nearly $10 billion by 2035 as logistical barriers, insurance costs and geopolitical restrictions gradually disappear.

Yet the tourism projections remain the most dramatic in the entire study. With Gulf air links reopened, Western travel restrictions lifted and Beirut airport regaining its regional role, tourism revenues could rise from approximately $1.8 billion today to more than $40 billion annually by 2035.

The tourism charts reveal the sharpest divergence between conflict and normalization. While the war scenario remains nearly flat around current levels, the normalization curve accelerates aggressively after 2030, eventually surpassing $40 billion annually. The study links this growth to Lebanon reclaiming part of the Eastern Mediterranean tourism market, which the UN projects could approach nearly $1 trillion annually by that date.

The gas file: Wealth delayed by instability

Few economic files in Lebanon generate as much political rhetoric as offshore gas. Yet the study approaches the issue with unusual realism.

According to the report, offshore gas reserves represent genuine long-term wealth, but they cannot solve Lebanon’s immediate crisis. Under continued conflict, gas revenues remain effectively zero throughout the entire simulation period, as no international energy company would deploy multi-billion-dollar extraction infrastructure in an active conflict zone.

Under full normalization, exploration and development begin immediately, but technical realities delay revenues for years. Drilling operations, platform construction, subsea pipelines and integration into regional energy networks require at least four to five years before production begins. As a result, the study projects Lebanon’s first meaningful gas revenues only after 2029.

By 2035, gas revenues could reach approximately $4.8 billion annually, potentially forming the basis of a sovereign wealth fund.

The gas charts reflect this delayed trajectory clearly. Unlike investment or tourism, gas revenues remain absent for several years even under peace before beginning a steep upward climb later in the decade. The study therefore warns against treating offshore gas as an immediate solution to Lebanon’s financial crisis.

Two different economic futures

By 2035, the study effectively presents two radically different versions of Lebanon.

In the conflict scenario, Lebanon remains trapped in an economy worth approximately $29 billion, with depleted reserves, weak investment, stagnant tourism and continued emigration.

In the full normalization scenario, GDP rises to nearly $56.8 billion. Central Bank reserves climb to approximately $38 billion. Foreign investment reaches $3.5 billion annually. Tourism revenues exceed $40 billion, while gas revenues begin contributing nearly $4.8 billion per year.

The study also outlines an intermediate “fragile peace” scenario, where GDP reaches $39.8 billion by 2035, reserves rise to $14 billion, tourism revenues approach $9 billion and foreign direct investment climbs to nearly $1 billion annually, figures that still remain far below the gains projected under full normalization.

The charts summarizing the simulation show the two trajectories gradually separating throughout the decade before diverging dramatically later on. Under continued conflict, nearly all economic indicators remain flat or deteriorate. Under normalization, however, the curves accelerate sharply across tourism, investment, reserves and exports, illustrating how geopolitical stability alone could fundamentally reshape Lebanon’s economic scale within ten years.

The gap between the two trajectories ultimately amounts to $27.8 billion every year.

The report stresses that governance reforms remain essential: restructuring the banking sector, improving transparency, managing gas revenues responsibly and ensuring reconstruction funds are not wasted. But it also argues that reforms alone cannot unlock recovery without geopolitical stability.

In the end, the figures point to a stark reality: Lebanon’s economic trajectory over the next decade may depend as much on geopolitics as on reforms themselves.

The cost of waiting

What makes the study striking is not only the scale of the figures, but the contrast between the two trajectories it presents. One path shows an economy gradually exhausting itself under recurring instability, shrinking reserves and stagnant growth. The other reflects how quickly capital, tourism and investment could return once uncertainty begins to fade.

Between the two lies a gap measured not only in billions of dollars, but in opportunities, confidence and an entire economic future Lebanon risks postponing year after year.