The economy of Lebanon has been experiencing a large-scale multi-dimensional crisis since 2019, including a banking collapse, the Lebanese liquidity crisis and a sovereign default. It is classified as a developing, lower-middle income mixed economy. The nominal GDP was estimated at $26 billion in 2024, with a per capita GDP amounting to $4,473.
The Lebanese economy went through a significant expansion after the 34-day war of 2006, with growth averaging 9.1% between 2007 and 2010. After 2011 the local economy was affected by the Syrian civil war, growing by a yearly average of 1.7% on the 2011–2016 period and by 1.5% in 2017. In 2018, the size of the GDP was estimated to be $54.1 billion. Between 2019 and 2021, the economy shrank by 53.4%, the highest contraction in a list of 193 countries. Since 2020, the International Monetary Fund no longer publishes data on the Lebanese economy.
Lebanon is the third-highest indebted country in the world in terms of debt-to-GDP ratio. As a consequence, interest payments consumed 48% of domestic government revenues in 2016, thus limiting the government's ability to make needed investments in infrastructure and other public goods.
The Lebanese economy is service-oriented. Lebanon has a strong tradition of laissez-faire, with the country's constitution stating that "the economic system is free and ensures private initiative and the right to private property". The major economic sectors include metal products, banking, agriculture, chemicals, and transport equipment. The main growth sectors include banking and tourism. There are no restrictions on foreign exchange or capital movement.
History
+GDP per capita in international dollars, 1980–2012 Year Lebanon MENA avg 1972 5,322 3,346 1981 5,897 3,581 1982 3,970 3,681 1983 5,064 3,781 1984 7,592 3,903 1985 9,613 3,980 1986 9,025 3,873 1987 10,722 3,869 1988 7,875 3,826 1989 4,674 4,001 1990 4,158 4,191 1991 5,649 4,472 1992 5,925 4,570 1993 6,352 4,658 1994 6,868 4,764 1995 7,320 4,860 1996 7,606 5,138 1997 7,892 5,352 1998 8,031 5,512 1999 7,928 5,585 2000 8,077 5,876 2001 8,478 6,063 2002 8,792 6,261 2003 9,144 6,711 2004 9,959 7,175 2005 10,367 7,360 2006 10,751 7,882 2007 11,893 8,354 2008 13,116 8,735 2009 14,197 10,862 2010 15,168 10,920 2011 15,523 11,896 2012 15,985 13,088
Following independence from France, Lebanon established itself as a free-trade economy. The service sector, specifically banking, finance and tourism, dominated the economy. Beirut thrived as the "Paris of the Middle East" and served as the financial and business center of the Arab world.
The 1975–1990 Lebanese Civil War seriously damaged Lebanon's economic infrastructure, cut national output by half, and had major consequences for Lebanon's position as a Middle Eastern entrepot and banking hub.Lebanon. The World Factbook. Central Intelligence Agency. After the war, the central government regained its ability to control key port and government facilities. As a result, GDP per capita expanded 353% in the 1990s. Economic recovery has been helped by a financially sound banking system and resilient small- and medium-scale manufacturers, with family remittances, banking services, manufactured and farm exports, and international aid as the main sources of foreign exchange. Lebanon's economy has made impressive gains since the launch of "Horizon 2000," the government's $20 billion reconstruction program in 1993. Real GDP grew 8% in 1994 and 7% in 1995 before Israel's Operation Grapes of Wrath in April 1996 stunted economic activity. Real GDP grew at an average annual rate of less than 3% per year for 1997 and 1998 and only 1% in 1999. During 1992–98, annual inflation fell from more than 100% to 5%, and foreign exchange reserves jumped to more than $6 billion from $1.4 billion. Burgeoning capital inflows have generated foreign payments surpluses, and the Lebanese pound has remained relatively stable. Progress also has been made in rebuilding Lebanon's war-torn physical and financial infrastructure. Solidere, a $2-billion firm, is managing the reconstruction of Beirut's central business district; the stock market reopened in January 1996, and international banks and insurance companies are returning. The government nonetheless faces serious challenges in the economic arena. It has had to fund reconstruction by tapping foreign exchange reserves and boosting borrowing. Reducing the government budget deficit is a major goal of the current government. The gap between rich and poor grew in the 1990s, resulting in popular dissatisfaction over the skewed distribution of the reconstruction's benefits and leading the government to shift its focus from rebuilding infrastructure to improving living conditions.
After the end of the civil war, Lebanon enjoyed considerable stability, Beirut's reconstruction was almost complete, and increasing numbers of tourists poured into the nation's resorts. The economy witnessed growth, with bank assets reaching over US$75 billion, Market capitalization was also at an all-time high, estimated at $10.9 billion at the end of the second quarter of 2006. The month-long 2006 war severely damaged Lebanon's economy, especially the tourism sector. Over the course of 2008 Lebanon rebuilt its infrastructure mainly in the real estate and tourism sectors, resulting in a comparatively robust post war economy. Major contributors to the reconstruction of Lebanon include Saudi Arabia (with US$1.5 billion pledged), the European Union (with about $1 billion) and a few other Persian Gulf countries with contributions of up to $800 million.
Given the frequent security turmoil it has faced, the Lebanese banking system has adopted a conservative approach, with strict regulations imposed by the central bank to protect the economy from political instability. These regulations have generally left Lebanese banks unscathed by the 2008 financial crisis. Lebanese banks remain, under the current circumstances, high on liquidity and reputed for their security. In late 2008, Moody's shifted Lebanon's sovereign rankings from stable to positive, acknowledging its financial security. Moreover, with an increase of 51% in the Beirut stock market, the index provider MSCI ranked Lebanon the world's best performer in 2008. Lebanon is one of the only seven countries in the world in which the value of the stock market increased in 2008. The Lebanese economy experienced continued resilience, growing 8.5 percent in 2008, 7 percent in 2009 and 8.8% in 2010. However, Lebanon's debt to GDP ratio remained one of the highest in the world.
The Syrian crisis has significantly affected Lebanese economic and financial situation. The demographic pressure imposed by the Syrian refugees now living in Lebanon has led to competition in the labour market. As a direct consequence unemployment has doubled in three years, reaching 20% in 2014. A loss of 14% of wages regarding the salary of less-skilled workers has also been registered. The financial constraints were also felt: the poverty rate increased with 170,000 Lebanese falling under the poverty threshold. In the period between 2012 and 2014, the public spending increased by $1 billion and losses amounted to $7.5 billion. Expenditures related only to the Syrian refugees were estimated by the Central Bank of Lebanon as $4.5 billion every year.
The International Monetary Fund issued a second report on Lebanon in October 2015, where its expectations of the economic growth rate were lowered to 2%, compared to the 2.5% growth rate of the first report, released in April 2015.
In October 2019, Lebanon witnessed nationwide protests that erupted over the country's deteriorating economic conditions. Thousands of demonstrations took to the streets of downtown Beirut, calling for the government of Prime Minister Saad al-Hariri to quit over "its utter failure to stop the deterioration of the economic and living conditions in the country". The protests began after the government announced to charge 20 cents per day for Voice over Internet Protocol (VoIP) over social media apps, including WhatsApp, Facebook, and other applications.
Lebanon has a very high level of public debt and large external financing needs. The 2010 public debt exceeded 150.7% of GDP, ranking fourth highest in the world as a percentage of GDP, though down from 154.8% in 2009. At the end 2008, finance minister Mohamad Chatah stated that the debt was going to reach $47 billion in that year and would increase to $49 billion if privatization of two telecoms companies did not occur. The Daily Star wrote that exorbitant debt levels have "slowed down the economy and reduced the government's spending on essential development projects".
During the early part of 2020, the central bank (BdL) defaulted on $90 sovereign debt obligations and the government needed recourse to the IMF for a shortfall of $50 billion.
On 4 August 2020, the explosion of 2,750 tons ammonium nitrate in a Beirut port warehouse caused the destruction of the "only large grain silo" in the country, in addition to more than 200 people killed and several square kilometres of pulverised buildings in the downtown core of the city. By 9 August, President of France Emmanuel Macron had counted over €250 million of global contributions to the relief effort. On 10 August, the government of Hassan Diab resigned. The day before, IMF director Kristalina Georgieva had laid down four conditions for the co-operation of her organization: restoring the financial solvency of the state, cutting losses at state-owned companies, passing a law to regulate capital outflows and setting up a social safety net. On 14 August, the United Nations Office for the Coordination of Humanitarian Affairs (UNOCHA) launched a $565 million appeal for donors of aid to victims of the explosions. The UN effort was to focus on: meals, first aid, shelters, and repair of schools. Some of the money that Macron collected would be used by the UNOCHA.
Reforms
Lebanon's current program of reforms focuses on three main pillars:
Economic revival and sustainable growth, with the private sector as the engine of growth; Fiscal consolidation and structural improvement in public sector finances; and Monetary, financial, and price stability.
The government also has maintained a firm commitment to the Lebanese pound, which has been pegged to the dollar since September 1999. In late 2000, the government substantially reduced customs duties, adopted export promotion schemes for agriculture, decreased social security fees and restrictions on investment in real estate by foreigners, and adopted an open-skies policy, with positive effects on trade in 1991. Nonetheless, the relative appreciation of the Lebanese currency has undermined competitiveness, with merchandise exports falling from 23% of GDP in 1989 to 4% in 2000.
In 2001, the government turned its focus to fiscal measures, increasing gasoline taxes, reducing expenditures, and approving a value-added-tax that became effective in February 2002. Slow money growth and dollarization of deposits have hampered the ability of commercial banks to finance the government, leaving more of the burden to the central bank. This monetization of the fiscal deficit has put enormous pressure on central bank reserves, mitigated only slightly with the issuance of new Eurobonds over the past 2 years. The central bank has maintained a stable currency by intervening directly in the market, as well as low inflation, and succeeded in maintaining investors' confidence in debt. It has done so at a cost, however, as international reserves declined by $2.4 billion in 2000 and by $1.6 billion in the first half of 2001.