The World Bank released its Lebanon Macro Poverty Outlook report in which it estimated Lebanon’s economy to have contracted by 0.2% in 2023, 0.6% in 2022 and 7.0% in 2021, projecting a growth of 0.5% in 2024. The World Bank attributed the economic contraction of 2023 to the escalating conflict in South Lebanon in the aftermath of the war on Gaza which has resulted in hundreds of casualties and injuries in addition to the displacement of around 90,000 individuals in the country. According to the report, hundreds of houses in South Lebanon have been destroyed amid the gargantuan destruction of local infrastructure, with agricultural lands suffering significant damage, burning and contamination. The conflict led to a shock in the tourism sector in the fourth quarter of 2023 which has affected economic growth. The World Bank mentioned that the conflict in the South is further weighing on Lebanon which is still trapped in a deep socio-economic crisis amidst political and institutional vacuums (presidential, caretaker government, limited parliamentary action, and no political will to undertake imminent and necessary reforms). The report also noted that economic growth in 2023 would have been positive at 0.2% mainly driven by robust tourism receipts in the first nine months of the year had it not been for the Gaza war’s rippling effect. From another perspective, the World Bank report stated that revenues are estimated to have increased from 6.1% of GDP in 2022 to 15.3% of GDP in 2023 due to the revenue mobilization measures included in the 2022 budget (which materialized in 2023) and the decision to begin collecting port and airport fees in US Dollar starting in 2023. Furthermore, the report revealed that the decision of the new management at BDL to stop the monetary financing of the budget in the second half of 2023 explains the fiscal (0.5% of GDP) & primary (1.6% of GDP) surpluses registered in 2023. The report also mentioned that the parliament has ratified the 2024 government budget which projects a zero fiscal balance and revenues at 17.3% of GDP in 2024, noting that the fiscal balance does not take into account past arrears and the government’s foreign currency debt. The World Bank commented in this respect that the 2024 budget is a “missed opportunity” to pass direly needed changes to the budget and the fiscal policy. In parallel, the report stated that the LBP to USD exchange rate has stabilized at around LBP 89,700 per USD starting mid-2023 around the time when the change in BDL’s management took place. This is mainly owed to the halt of the Sayrafa platform, an increase in foreign exchange inflows from tourism and remittances, and a drop in currency in circulation. In the same vein, the Central Bank of Lebanon’s gross reserves (liquid reserves) rose by $883 million in the last five months of 2023. Inflation increased to 221.3% in 2023 mostly owing to the acute devaluation of the Lebanese Pound against the US Dollar in the first half of the year. The stability of the exchange rate in the second half of the year saw monthly inflation dwindle to an average of 1.2% between August and December 2023 (with the exception of October which saw a more than six-fold hike in the education component of the CPI). The current account deficit is projected to narrow to 11% of GDP in 2023 following a sizeable increase to 32.7% of GDP in 2022. The contraction in the current account deficit (from $6.9 billion in 2022 to $2.0 billion in 2023) was mostly driven by a contraction in trade-in-goods deficit and a 10% of GDP surplus in trade-in-services. The World Bank report noted that as Lebanon adjusts to the fickle security situation and assuming that tensions in the South subside in the second half of the current year, real GDP growth is likely to hit positive grounds in 2024. As per the report, without a crisis resolution plan and a new viable growth model, additional losses to Lebanon’s physical, human, social and natural capital stock are plausible. Finally, inflation is projected to drop to 83.9% in 2024 as the components of the CPI become increasingly dollarized.