World Bank predicts Israel-Hamas war could push Lebanon back into recession

(Patria) - The effects of the war in Gaza are likely to push Lebanon's fragile economy, which had begun to recover slightly after years of crisis, back into recession, according to a World Bank report.

Before the outbreak of the war between Israel and Hamas on October 7, the World Bank had forecast that the Lebanese economy would grow in 2023, by a meager 0.2%, for the first time since 2018, mainly due to remittances sent by Lebanese working abroad and a rise in tourism.

However, since the war in Gaza began, near-daily clashes between Hezbollah and Israeli forces along the Lebanese-Israeli border have heightened fears of escalation into a full-scale war.

The tensions have largely made travel to Lebanon difficult, at least temporarily, AP reported.
Data analyzed by the World Bank shows that the percentage of scheduled flights to Lebanon that operated fell from 98.8% on October 7 to 63.3% on November 4. Arrivals picked up as the low-level conflict on the border did not immediately escalate and as many Lebanese living abroad came home for the holidays. However, the World Bank predicts that Lebanon's GDP will shrink by -0.6% to -0.9% in 2023 instead of slight growth.

The projections are based on the assumption that the border conflict will continue at its current level without major escalation by the end of the year.

"Lebanon's reliance on tourism and remittances inflows is neither a sustainable economic strategy nor a plan to address the economic crisis," the report states.

"As tourism is volatile and subject to external and internal shocks... the sector cannot substitute for more sustainable and diversified growth drivers."

Lebanon plunged into a protracted economic crisis in 2019, with triple-digit inflation and the collapse of its local currency. The lira, which was pegged to 1,500 to the dollar for a quarter of a century, now trades at around 90,000 on the black market.