This analysis was written as part of a Special Report on the repercussions of war across six polities from October 7th, 2023-December 2025
Two narrative strands of economic disintegration and destruction have been woven into a, very much negatively biased, tale of Lebanon’s battered national identity. The dominant strand is the meltdown of liquidity, finance, jobs, the formal economy, livelihoods, old-age savings and social security, partially rooted in the allegedly intentional “Ponzi Scheme” formed in the country’s highest politico-financial-oligopolistic echelons as far back as the 1990s. The junior but even more virulent strand of the narrative is willful destruction of Lebanese assets and infliction of economic losses that has been estimated at been $14 billion as of spring 2025, with detrimental violations of Lebanese sovereignty that have been continuing up to the time of this report, one year after a ceasefire agreement which remains quite fragile due to near-daily violations by Israel.
The immense detriment of wartime destruction and ongoing violations to Lebanon and Lebanese livelihoods, reflected in contraction of GDP by 6.4 percent in 2024, is still only a fraction of the economic losses from homegrown systemic mismanagement and self-harm. If one accepts the idea of a combined 33 percent GDP drop in 2020 and 2021, one can estimate the recovery need as $20 billion in economic productivity and multiples of this amount for restoration of destroyed popular wealth. Restitution of the latter is imaginable in this magnitude only if the state accepts the responsibility for its liabilities owed, via the central bank and commercial banks, to savers. Without public sector accountability, the destroyed financial wealth of the very few, the previously influential, and the vast headcount of triply poor sods that have worked and saved for one to four or more decades, can be transcribed into a debt mountain whose elimination is facilitated by “haircuts” after monetary value depreciation to the tune of 99 percent.
The economic equation of Lebanon has thus seen a forced, and exceedingly brutal, correction that shifted the formula away from a rentier system under impetus of cronyism, excessive debt finance of public consumption and private consumerism, and capex paucity in a narrow services envelop dominated by banking. Overbalancing the policy focus in direction of the real economy was a fleeting attempt of a short-lived administration that was instituted in January 2020 and was aborted in the aftermath of the Beirut Blast shock and resignation of the council of ministers under premier Hassan Diab.
Looking out over ruins
Lebanon’s economic outlook remains acutely fragile as the country absorbs the compounded shocks of prolonged financial collapse and conflict-related destruction. According to the World Bank’s Rapid Damage and Needs Assessment (RDNA), the total economic cost of the conflict is estimated at approximately US$14 billion, comprising US$6.8 billion in physical damage and US$7.2 billion in economic losses stemming from disrupted activity, reduced productivity, and service interruptions. Importantly, these figures are explicitly conservative: the RDNA covers a 26-month assessment period and does not include damages or losses incurred during 2025, implying that the true economic toll is already materially higher than reported. Recovery needs, estimated at $11 billion pre-2025, can be combined with existing crisis-era public debts of over $70 billion for a cumulative estimate reaching between $80-$90 billion.
At the macroeconomic level, the conflict has sharply deteriorated growth dynamics. The RDNA estimates GDP to have contracted by 7.1 percent in 2024 (70 basis points over the latest central bank estimates), compared to the year’s pre-conflict expectations of marginal growth, pushing Lebanon’s cumulative output loss since 2019 to 40 percent. This contraction reflects both direct conflict disruptions and the erosion of already-weakened demand, investment, and labor market conditions. With fiscal space virtually exhausted and monetary stability still fragile, near-term growth prospects remain tightly constrained by reconstruction capacity and external financing availability.
Sectoral impacts reveal a highly asymmetric damage profile. Housing and civil infrastructure account for roughly two-thirds of total physical damage, or around US$4.6 billion, driven by the destruction or partial damage of tens of thousands of housing units, particularly in southern districts. Beyond the immediate humanitarian implications, housing damage represents a long-term drag on household wealth, labor mobility, and domestic demand, while placing significant pressure on reconstruction financing needs relative to other sectors.
Economic losses are most pronounced in three sectors that the WB’s RDNA—undertaken “rapidly” after all—aggregates into one group: commerce, industry, and tourism. The RDNA estimates sectoral losses of approximately US$3.4 billion, reflecting sharp declines in tourism inflows, retail and wholesale trade disruptions, factory shutdowns, and weakened professional services activity. These losses, spatially concentrated in Beirut, Nabatiyeh, and Tyre, indicate how war has disrupted Lebanon’s primary commercial nodes and urban service economies rather than remaining confined to frontline areas.
Conflict-related damage to transport and logistics infrastructure, including nearly 930 kilometers of affected roads, compounds these losses by weakening inter-regional connectivity and raising transaction costs across the economy. Meanwhile, agriculture and food systems—though accounting for a smaller share of physical damage—have suffered over US$1 billion in losses by end of 2024—certainly a far higher number following a full year of near-daily attacks in the south and Bekaa/Hermel regions specifically due to destroyed crops, livestock losses, and farmer displacement.
Regionally, the South and Nabatiyeh governorates are reported as the most heavily impacted in both damage and loss terms, while Mount Lebanon and Beirut bear substantial indirect economic losses due to their concentration of services, trade, and tourism activity. The geographic distribution of impacts include both localized physical destruction alongside nationwide economic reverberations.
With the current pivot to assurance of sovereignty and security under an internationally tested model of the state’s control over territory and monopoly over violence, which has been initiated in early 2025 and reached the point of implementing direct diplomacy in the search of coexistence with neighbors Israel and Syria in December, comes an imperative to reshape the economic sectors not so much in their macroeconomic order but their governance and development orientation.
Whereas rebuilding of the financial services sector remains as cornerstone requirement in the economy, it is not yet at the stage where unity of policy visions and acceptance of liabilities has matured to the level of facilitating quick growth. Doubts over the state’s sincerity and the reformist government’s effectiveness were raised by impressions of unrealistic promises and ministerial drag, from some ministers down.
Other sectors, such as the political economy of state-owned enterprises, is also in need of agreeing on a secure policy and legal foundation. In actuality, there does not appear to be a single sector in the country that isn’t in need of investments and rebuilding, new direction, and reform.
But sectors that appear deemed strategic development priorities for private and public stakeholders at the end of 2025 are reconstruction and construction of infrastructures and real estate focused on productive and productively taxed real estate up to the level of urbanity design under a governance direction of climate impact mitigation and sustainability that is aligned with the country’s climate and environmental protection goals (which includes the energy sector); the digital transition and tech sector inclusive of the creative and cultural industries (CCI); niches in manufacturing that range from tech and pharma to healthy beauty products; agriculture and the agro-food industry, and tourism in a regional integration context.
The mix of strategic sectors is new but not rooted in long-existing strengths of the Lebanese economy. More than ever before, however, it demands wise balancing between capital investment in the real economy and development of the services economy. A binding component, or glue, needs to come from the entrepreneurship ecosystem that needs to recover further after falling into paralysis early during the economic and social crisis.
Construction & urban development
The property sector, which is foundational to the concepts of wealth and security and which since the pre-industrial age ranks with trade and agriculture as pillars of societal sustenance and stability, was distorted by wars and disorder in the past century. Unregulated and poorly managed urbanization turned once-charming cities into hardly sustainable behemoths, traffic corridors into productivity barriers and many rural villages into eyesores.
The latest war on Lebanon – which caused more than $4.6 billion in damages and destruction of residential dwellings – and the growing understanding of climate, environmental, and social risks have led to a new turn in the role of Lebanon’s highly urbanized property fabric. Construction, real estate and urban development has been turned into a meta-sector that is vital for recovery of livelihoods and restoration of social fabrics, for property and infrastructure development under environmental and climate as well as social, heritage preservation, and economic productivity priorities.
This multi-faceted sector, augmented with sustainability is critical for rebuilding residential dwellings that have been destroyed and damaged in Lebanon and Syria over the past two and the past 14 years (the need for building reconstruction in Syria was estimated at 100 to 300 billion USD already in 2018), for cleaning and recycling rubble left by 2024 and 2025 Israeli aggressions, for implementing infrastructures from external gateways to road and utility networks, for turning the cityscapes of Beirut, Triploi, and Sidon into urban productivity hubs, and for making Lebanese cities climate-proof.
Digitalized knowledge economy
Another strategic meta-activity for Lebanon (and the entire region) covers the category of the digital knowledge economy, which entails information technology sectors (software and hardware), cultural and creative industries (CCI), and adjacent fields of automation and machine learning.
Attempts to roll out ICT, regulate the sector, or foster tech startup companies by encouraging an entrepreneurship ecosystem, remained fragile and vulnerable throughout the 1990s and 2000s. Until Banque du Liban (BDL), the central bank, stepped in with a financing support package – known as Circular 331 – in 2012, the country’s entrepreneurship ecosystem and the tech startups that are vital for the sector were not seeing much strategic government support.
The knowledge economy thrust by BDL into the national economy spotlight sputtered and nearly stopped with the onset of the troubled 2020s. As Kamal Shehadih, the minister of displaced and minister of state at the recently declared office for the Ministry for Information Technology and Artificial Intelligence (MITAI), told an inaugural Beirut AI Summit in November, tech startup investments that had been worth about $500 under BDL Circular 331 up to 2019 dropped $5 million in the last five years. This explains the paradox of a sector that has shaped many entrepreneurial ventures – the usual high portion of failures but also some astonishing success stories – over some three decades.
Aims of the new ministry include innovation partnerships with academic institutions, seeing tripling of tertiary education graduates with AI-relevant skills to 10,000 by 2030, and a digital tech contribution to Lebanese GDP at around 10 percent. A sector that has become intertwined with expectations of increasing AI usage is moreover the media and creative production sphere. Cultural and creative industries, or CCI, could according to several well-known CCI stakeholders rise to contribute similar percentages to Lebanese GDP as before the economic crisis when almost 5 percent of GDP came from companies and individuals with cultural and creative profiles.
Whereas direct and indirect war impacts on the knowledge economy were not as high as impacts on the housing and agricultural sectors, economic losses were recorded for education and thus implied for human capital formation but the negative effects of the economic crisis years, including the Covid dampener, must be regarded to number multiples of the war Lebanon was subjected to in 2024.
The demises of startups that suddenly saw their funding vanish, destruction of banking links, outmigration of creatives and tech talents, relocation or withdrawal of ecosystem players, forced cancellation of festivals, foregone income because of performers’ staying away, detriments in the urban quality of life and increased inability to attract needed specialists, breakdown of advertising income and cultural and commercial sponsorships, temporary creativity impairments of mentally anguished singers, designers, poets, producers, and hyper-sensitive editors, and other economic detriments were all reported from the tech entrepreneurial and CCI spheres, with no complete assessment of cumulative losses and long-term economic effects.
Whatever the expectations and projections are in the broad landscape ranging from arts and crafts to digital services and machine learning, and whatever downside risks, intellectual property ambiguities, and implosion possibilities of a new global to local tech bubble are, the local tech sector and digital empowerment of Lebanon is the primary, and broad, field that has to be included in any strategic economic growth plan, with stable institutional provisions for supporting the confluence of real and services economies, public policy and regulatory development and oversight, and top-notch requisite skills development through academia.
Agriculture and Agro-industry
Being a breadbasket of old and a culinary basket of Mediterranean cuisine are two beacons that signal the economic importance of the real economy fundamental of agriculture and agro-industry in Lebanon – beyond all concerns over equitable access to balanced nutrients under food security paradigms. The war impact on agriculture, especially small operators and artisanal processors, was brutal.
Judging by 2025 discussions among sector stakeholders, the progress of the sector in matters ranging from reduction of food loss and food waste to circularity, quality testing, and improved alignment with international market standards, and thus sustainability of agricultural production and exportability of agro-food products, may be glacial. But the importance of improving sector formality and productivity in context of the right to dignified work, the water-energy-food nexus, the availability, quality, and rapidity of testing, etcetera, becomes only more urgent with each season where achievements in the agro-food sector’s regulatory, environment, social, and economic matters are absent or sub-par.
Manufacturing niches
The knowledge of manufacturing industry’s crucial function in an internationally competitive economy is present in Lebanon – at least among industrialists, the venture capital community, and concerned international agencies such as UNIDO and UNDP. While economies of scale are illusory in the small country, the complexity of the Lebanese economy and the entrepreneurial ingenuity open doors for growth in non-agro-industry niches such as healthy cosmetics, pharmaceuticals, select chemicals, prefabricated housing units, and specialized IT.
The destruction of manufacturing plants during the 2024 war was manageable, even as economic losses did accumulate through forced company displacements and temporary closures. However, the sector’s mettle was already at a peak because of industrialists’ extensive resilience training by the barrage of hard lessons that had been running for decades of governmental ill-treatment and corruption and been escalated by many notches in the economic crisis years.
Regionally fortified tourism
Tourism is vital for the next phase of Lebanon’s economic development. Based on the country’s natural and cultural savoir vivre appeal of the 1960s, the hospitality sector was nonetheless a no-brainer as development focus from the moment that the 16-year Lebanese conflict was superseded by (relative and deceptive) calm and reconstruction attempts under administrations led by the late Prime Minister Rafic Hairiri.
But it was a strategic sector in a disjointed form, being as important for GDP and livelihoods as it was underrepresented in strategic policy considerations and malnourished in terms of governmental coordination and promotional efforts. Externally, it was curtailed by shifting demand factors in narrow source markets for regional, religious, cultural, and expatriate holidaymakers.
Repetitive conflict impacts on the sector came from heavy disturbances of peace and threats of terror in the Levant and also from concerning events as far away as Egyptian destinations on the Red Sea and the Anatolian Rivera. The tourism impact of the 2023-24 conflagrations confirmed the sector’s vulnerability to security problems with a vengeance, even as Beirut airport remained operational.
Still, even during the economic crisis years of 2022 and 2023, the seasonal expatriate Lebanese and other visitor inflows were life buoys for the economy. This notwithstanding, neither a satisfactory budget allocation nor a coherent strategy for tourism was evident from the reformist government of 2025.
Hospitality sector representatives from the start of 2025 told Executive once again of the opportunity, albeit thus far not visibly improved or better monetized during the course of the year, that regional integration of destinations and attractions as well as improved alignment of cultural, religious, green, blue, rural and MICE (meetings, incentives, conferences & exhibitions) offerings in both national and cross-border terms.
All in all, global tourism expectations for the digital era point to still more quantitative growth and activities that cross into trillion-dollar territory by start of the next decade. Lebanon may well remain a tourism dwarf when compared with MENA markets like Turkey and Egypt and the giant destination countries to the north of the Mediterranean. This baseline, however, only affirms the importance of hospitality as the country’s paradigmatic services industry and makes investments into the sector’s quality and diversity paramount for Lebanon.
Moreover, the systemic, social and economic, weaknesses that have begun to inform the global tourism trade drive home the message that this country needs more than fancy tourism strategy documents. It needs not only safety and regional calm but also regional integration of offerings and, above all, a sustainable and environmentally responsible development direction.
