The United Nations Development Programme (UNDP) published on October 23, 2024 a rapid appraisal report titled “Economic and Social Consequences of the Escalating Hostilities in Lebanon” in which it attempted to assess the impact of the war on Lebanon. The report mentioned that the state of Lebanon’s economy is already dire, with GDP having contracted by 28% over the 2018-2021 period. In addition, the local currency depreciated by more than 98%, with the country becoming victim to hyperinflation and witnessing a significant reduction in Lebanon’s dollar GDP and accordingly saw the erosion of the population’s purchasing power. According to the report, the size of the military engagement, the geopolitical context, the humanitarian impact, and the economic contraction in 2024 are expected to be significantly larger than in 2006. The report stated that the rising hostilities in Lebanon would have a deep and far-reaching impact on GDP and employment. More specifically, the report revealed that the number of casualties up until October 17, 2024 exceeded 2,400 while the number of injuries surpassed 11,000, noting in this respect that the ongoing conflict threatens to destabilize Lebanon’s frail economy even more. The UNDP stated that the rapid appraisal it conducted is based on two key assumptions: 

1)    The conflict will persist through the end of 2024, which will lead to a 20% drop in trade activities due to the closure of the Lebanese Syrian border. In addition, the transport and communications sector is anticipated to contract by 10% primarily due to lower airport traffic, while the services sector is expected to decline by 4%

2)    The destruction of capital is assumed to be somewhat limited across sectors except in the agriculture & livestock sector, which is expected to drop by 20%

The report also provided some short-term implications resulting from the conflict. In details, GDP is expected to contract by 9.2% in 2024, resulting in a large drop in economic activity of around $2 billion. In addition, unemployment is expected to increase drastically in 2024, resulting in notable job losses and economic displacement that is mostly the result of labor demand loss across several sectors. Furthermore, the report noted that Micro, Small, and Medium Enterprises (MSMEs), which the Central Bank estimated to represent around 90% of the Lebanese economy, would be heavily impacted as some MSMEs were forced to close or suspend their businesses. The report added that exports are expected to decline by 9.84% in 2024 with imports also expected to drop by 10.87%. From another perspective, the report noted that roads were badly damaged by the current war, while bridges, power plants, and the airport are still at risk, which would altogether result in a slower than expected GDP recovery. The report also stated that the conflict will affect all economic sectors in an uneven fashion, with the agriculture & livestock sector expected to drop by 6.25%, while the energy & water sector is anticipated to plummet by 24.5%, the transport & communication sector is estimated to drop by 12.04%, and the trade sector is expected to plunge by 21.18%.

Over the long-term, and even if the conflict in Lebanon ends in 2024, the report revealed that the consequences of the hostilities are expected to last for years. GDP is projected to contract by 2.28% in 2025 and by 2.43% in 2026. In the same vein, the UNDP report also revealed that total investment could decline by 6.3% in each of 2025 and 2026, with private investment facing possible drops of 6.6% in 2025 and 6.7% in 2026, reflecting low investor confidence. Exports are projected to drop by 1.25% in 2025 and by 1.39% in 2026, while imports could decrease by 3.07% in 2025 and by 2.74% in 2026 as economic activity declines and trade disruptions persist.

According to the report, the ongoing hostilities will have a considerable impact on Lebanon with long-term economic and social ramifications. The UNDP noted that the international community must mobilize immediate humanitarian relief support. The report also emphasized the need to mobilize assistance to support economic, social, and institutional stability with a special emphasis on supporting the recovery of the private sector, investing in human capital, reviewing Lebanon’s domestic & international financing instruments, supporting the balance of payments, reconstructing the country’s infrastructure, and supporting social stability.