The World Bank recently released its Lebanon Economic Monitor (LEM) Winter-2025 report titled “A Fragile Rebound” where it tackled the latest developments and policies related to the Lebanese economy over the past six months. The World Bank projected the Lebanese economy to have grown by 3.5% in 2025 amid a rebound in tourism, “early signs” of macroeconomic stabilization, and gains following years of economic contraction. In details, the World Bank pointed out that year-to-date statistics up to April 2025 show an 18% annual improvement in construction permits and ~49% rally in cement deliveries. Night-time lights, an easily available and highly frequent indicator that is correlated to economic activity, shows that luminosity has increased by 32.5% on an annual basis during the first half of 2025. The report attributed the projected growth for 2025 to the pickup in consumption which contributed 1.8 percentage points (pp) to real GDP growth, mainly supported by remittances and a higher level of dollarization of private sector wages. Other contributors to the 3.5% projected growth for 2025 include public expenditures (0.9 pp improvement on the back of higher levels of government spending), net exports (0.5 pp contribution to GDP growth), investments (a pale 0.2 pp contribution due to the high levels of uncertainty). The World Bank commented, however, that the 3.5% growth for the year 2025 represents a downward revision from the 4.7% growth estimated in the Spring 2025 edition of the Lebanon Economic Monitor report, as the ongoing regional conflict which escalated at the peak of the tourism season during the month of June 2025 backfired on tourism activity. In addition, the World Bank report stated that the election of a President in early 2025, the formation of a new government, and the progress on long-due reforms (namely the amendment of the Banking Secrecy Law and the government making crucial appointments) have resulted in some institutional and political stabilization. The report noted, however, that progress on reforms is still lagging on other fronts while commenting that Lebanon needs to achieve a “rapid progress” on several items on the reform agenda in order to surmount the myriad of challenges it is currently facing. In details, the World Bank noted that the implementation of the banking sector restructuring law hinges on the passing of the financial gap law in the parliament. In addition, the World Bank suggested that several key reforms could be accelerated such as restoring debt sustainability, creating more fiscal room for institutional growth, improving public services and increasing social and reconstruction spending through progressive revenue mobilization. On the fiscal front, the report revealed that the debt to GDP ratio dropped to 157.4% in 2025 down from 176.5% in 2024, while adding that Lebanon is expected to achieve a fiscal balance in 2025 (zero budget deficit). The World Bank attributed this progress to better tax collection (13.2% of GDP vs an 11.7% level in 2024) and stronger non-tax revenues with custom revenues rallying by 193% on an annual basis during the first four months of 2025, yet pointed out that there still is ample room for improving the efficiency of revenue mobilization. Always in the same vein, the World Bank revealed that while the debt to GDP ratio has improved, its current level remains high, isolating Lebanon from international capital markets. Finally on the fiscal front, the report mentioned that the 2026 draft budget law anticipates fiscal equilibrium. On the current account front, the World Bank projected the deficit at 15.8% of GDP in 2025 down from 22.2% in 2024 on the back of an improvement in the export of services and sustained remittance inflows which remain understated by official statistics due to the exclusion of those flowing via informal channels. The report also pointed to the stability of the exchange rate since the month of August 2023, as better revenue collection, fiscal prudence, and the cessation of monetary financing have curbed liquidity in the local currency, better enabling the Central Bank to manage currency in circulation and ramp up foreign currency reserves. In figures, the World Bank mentioned that BDL’s foreign currency reserves have increased by ~$451 million between the months of August 2024 and August 2025 to $10.96 billion (covering ~6.8 months of imports) while noting that part of these reserves are being utilized to inject dollar liquidity into the economy in the form of partial deposit repayments under the provisions of circulars 158 and 166. The report also anticipated inflation to ebb to 15.2% in 2025 down from 45.2% in 2024 and 221.3% in 2023, thanks to exchange rate stability, the fading of exchange rate pass-through effects, and the almost complete dollarization of the CPI basket. On the outlook front, the report projects the Lebanese economy to grow by 4% in 2026 on the condition that progress on reform continues, political stability persists and the government succeeds in garnering “modest” reconstruction inflows. In the same regard, the World Bank anticipates remittance flows and tourism activity to be the main drivers of growth in 2026, yet cautioned that these drivers are bound by some risks. Inflation is also projected to fall to single-digit figures in 2026 for the first time since 2019 at 8.7% owing to a continued stability of the exchange rate, yet the level remains higher than international levels owing to limited competition and the prevalence of “oligopolistic market structures”. The World Bank projects the current account deficit to widen to 16.1% of GDP in 2026 (from 15.8% in 2025) as a result of a higher imports bill for construction material, while adding that a depreciation of the dollar against the Euro currency would further increase Lebanon’s import bill.