World Bank: Lebanon’s economy witnessed a “fragile rebound”

After years of deep economic contraction, Lebanon recorded positive economic growth in 2025, marking a cautious but meaningful turning point.

While the rebound remains modest and vulnerable to internal and external shocks, recent data suggest early signs of stabilization driven by tourism, private consumption, and incremental progress on long-awaited reforms. The challenge ahead lies in translating this fragile recovery into durable and inclusive growth.

A modest return to growth

According to the World Bank’s latest Lebanon Economic Monitor (LEM), real GDP expanded by 3.5% in 2025. This growth rate, although revised downward from earlier projections, represents Lebanon’s first sustained expansion after years of economic freefall. The growth reflects a combination of factors, including a rebound in tourism activity, stronger private consumption supported by remittance inflows, and increased dollarization of wages, which helped restore some purchasing power.

The World Bank’s Winter 2025 report, titled “A Fragile Rebound,” emphasizes that this recovery is neither broad-based nor secure. Investment levels remain subdued, reconstruction spending is limited, and the tourism season underperformed expectations amid ongoing regional tensions. Still, the return to positive growth has provided cautious optimism in a country long mired in crisis.

Reform progress and institutional stabilization

One of the more encouraging developments highlighted in the LEM is progress on Lebanon’s reform agenda. The passage of key economic and judicial laws, along with important civil service appointments, has contributed to a degree of political and institutional stabilization. These steps have helped restore limited confidence and improved coordination within state institutions.

However, major structural reforms remain pending. Chief among them is the long-delayed “Financial Gap Law” (which still requires Parliament approval), alongside critical sectoral reforms in areas such as energy, banking, and public finance. Without addressing these core issues, Lebanon’s ability to restore macroeconomic and financial stability will remain constrained. As World Bank Middle East Director Jean-Christophe Carret noted, sustaining the recovery will require faster and more ambitious reforms to secure lasting stability and inclusive growth.

Fiscal, monetary, and inflation dynamics

On the macroeconomic front, exchange rate stability has largely held since August 2023, supported by improved tax compliance and more prudent fiscal management. The debt-to-GDP ratio is projected to decline in 2025, primarily due to higher nominal GDP rather than meaningful debt restructuring. Public debt nonetheless remains elevated, and Lebanon continues to be excluded from international capital markets.

Fiscal performance has shown tentative improvement, with the budget expected to register a surplus on a cash basis. Yet revenue mobilization remains weak, and the tax system lacks sufficient progressivity. Inflation, a key burden on households in recent years, is projected to ease to 15.2% in 2025 and fall into single digits in 2026 for the first time since 2019. This decline is largely attributed to exchange rate stabilization and near-complete dollarization of consumer prices, although inflation persists in domestic service sectors such as education and housing.

Outlook and IMF engagement

Looking ahead, the World Bank forecasts real GDP growth of around 4% in 2026, contingent on sustained reform momentum, modest reconstruction inflows, and continued political stability. Remittances and tourism are expected to remain the primary drivers of growth, underscoring Lebanon’s continued reliance on external income sources.

In this context, renewed engagement with the International Monetary Fund (IMF) is critical. Prime Minister Nawaf Salam recently announced that an IMF mission will visit Lebanon from 9 to 13 February 2026 to advance technical discussions toward a potential program. Talks held during the World Economic Forum (WEF) in Davos were described as constructive, signaling cautious progress toward re-engagement with the IMF.

In conclusion, Lebanon’s economic rebound in 2025 offers a rare moment of guarded optimism after years of crisis. Yet the recovery remains fragile, uneven, and highly dependent on reform delivery and political stability. Without decisive action to address structural weaknesses and restore confidence, the current gains risk proving temporary. The coming months, particularly with renewed IMF engagement, will be pivotal in determining whether Lebanon can move from survival to sustainable recovery.