The World Bank recently released its Lebanon Economic Monitor (LEM) Spring-2025 report titled “Turning the Tide?” where it tackled the latest developments related to the Lebanese economy. The World Bank commented that the country’s economic outlook for the year 2025 is shaped by a fragile stability in the security and political environment whereby the conflict has receded, a new president was elected and a reform-oriented government was formed. The report commented that the government has already made key appointments, including a new Central Bank governor after a ~2-year vacancy, and has passed an amended banking secrecy law (ratified later by the parliament) to broaden the authority of several bodies (BDL, Special Investigation Commission and Banking Control Commission) to lift banking secrecy, and a draft banking sector resolution law which is currently being discussed at the level of parliamentary committees. The World Bank warned, however, that this improved outlook remains very dependent on a continued improvement in the security situation and the implementation of structural reforms. In this regard, the World Bank reflected that the war had a devastating effect on the Lebanese economy  which shed 7.1% in real terms in 2024 from 5.7% in the Fall-2024 edition, with all components (barring public consumption, contributing negatively to real GDP, aggregating the country’s economic losses since the year 2019 to ~40%.) The World Bank added that the agricultural, tourism and commerce sectors (being the main sources of income for low-wage and informal workers) accounted for 77% of the economic losses (total of $7.2 billion) of the latest war, deepening poverty and vulnerability levels, whilst commenting that reconstruction efforts are tied to the implementation of key reforms. The report projected the Lebanese economy to grow by 4.7% in 2025, which in the event of its materialization would be the first economic growth since the year 2017, supported by improved consumption & tourism levels, limited capital inflows and a base effect. In details, the report anticipated consumption to be supported by a higher marginal propensity to consume (owing to a better consumer sentiment), remittance & tourism inflows and an overall better economic activity. The report expected Lebanon’s inflation to moderate to 15.2% in 2025 (down from 45.2% and 221.3% in 2024 & 2023 respectively) aided by exchange rate stability and low global inflation, yet cautioned in this regard that global inflation may be impacted by the recent global trade war. In this regard, the World Bank commented that while the direct impact of the global trade war on Lebanon may be somewhat limited ) with exports to the U.S. (Lebanon’s 4^th largest export market) constituting just 5.7% of total exports and consisting mainly of relatively price inelastic olive oil and food products catered to the Lebanese diaspora(, the indirect impact is more difficult to predict. The World Bank commented that Lebanon’s fiscal balance is improving, supported by a better revenue collection, and could leave some room for increased spending on essential services and much needed public expenditures, yet indicated that fiscal pressures remain highly elevated and as such key reforms are needed in order to secure long-term fiscal stability. In figures, Lebanon’s fiscal surplus stood at 0.5% of GDP in 2024, with actual revenues of $3.96 billion (15.3% of GDP) way outweighing budgeted revenues of $3.44 billion (13.2% of GDP) and outpacing expenditures of $3.82 billion (14.7% of GDP). In this regard, the report added that the 2025 budget (not yet endorsed by the parliament) is targeting a zero deficit with anticipated revenues and expenditures of $4.97 billion (15.9% of GDP). The report commented that Lebanon’s current account deficit dropped to 22.2% in 2024 from 28.1% in the previous year, whilst indicating that while imports contracted by 11% on an annual basis, the trade services balance which Lebanon historically relied on to mitigate financing needs, turned negative in 2024 as a result of the sharp decline in tourism services exports. The World Bank projected Lebanon’s current account deficit to improve to 15.3% of GDP in 2025, supported by an improvement in nominal GDP and tourism-related services, yet indicated that the external sector remains under significant pressure, and that the accuracy of the current balance estimates is undermined by the informal and cash-based economy. Moreover, the World Bank projects the debt-to-GDP ratio to ease for the second year in a row to 152.4% in 2025 compared to 176.5% in 2024 and 219.0% in 2023. On the monetary front, the World Bank commented that the Lebanese Pound has remained exchange rate has remained stable at the 89,500 level against the U.S. dollar  since the month of August 2023, with BDL preserving this stability by purchasing U.S. Dollars from the market (foreign currency reserves increasing by $447 million in 2024) and reinjecting LBP in the market (thus managing currency in circulation). The World Bank report also included a special focus, which presents a one-year policy action plan based on the four objectives set by the ministerial statement being, halting financial & economic deterioration, strengthening social security, eliminating waste and corruption and drafting a fair elections law. In this regard, the World Bank’s policy plan pivots around three pillars namely restoring macroeconomic and financial stability, rebuilding citizen trust through improved governance, and investing in human capital and expanding economic opportunities. As far as the first pillar is concerned, the World Bank considered macroeconomic and financial stability to be the cornerstone to any reform implementation, and has accordingly suggested the establishment of a credible monetary & exchange rate system as well as the alignment of Anti-Money Laundering and Combatting the Finance of Terrorism (AML/CFT) frameworks with Financial Action Task Force (FATF) standards. Concerning the second pillar, the World Bank considered that public services suffer from mismanagement, inefficiency and under-investment, while adding that the digital government remains fragmented and that the procurement system remains “non-transparent”. Accordingly, the action plan recommended improving governance through the adoption of a revised public accounting law, initiating civil service restructuring and strengthening transparency via digital systems and public oversight bodies.

Finally, and with regards to the third pillar, the World Bank commented that Lebanon’s human capital is dwindling due to a deterioration in education quality, a crisis-ridden health care system and a weak safety net. Accordingly the action plan concerning this pillar suggests that the government explores bridge financing mechanisms to private sector enterprises in coordination with regional and international partners, along with enforcing the competition law, passing insolvency legislation and bolstering the role of the Investment Development Authority of Lebanon (IDAL).