Lebanon Economic Outlook
The economy appeared to stabilize in Q1–Q3, buoyed by strong remittances and tourism inflows, and reduced private sector debt. The PMI survey of private businesses improved through September compared to the 2022 average, while visitor arrivals were up 21% year on year in Q1–Q3. However, activity was held back by a depressed real-estate sector, triple-digit inflation, banking insolvency, weak government spending, a lack of public services, and political gridlock—the country has been without a president for over a year. Turning to Q4, economic conditions have deteriorated on fears that Lebanon could be drawn into the Israel-Hamas war, given the presence of Hezbollah—a paramilitary group and Hamas ally—in southern Lebanon. In October, visitor arrivals were down over a third month on month, and the restaurant sector has reportedly seen an up to 80% drop in business due to the war.
Inflation rose to 215% in October from 209% in September. Lebanon will have one of the highest inflation rates globally in 2024, though inflation should ease from 2023 on the fading impact of past currency devaluations and black-market lira depreciation. Further devaluations and informal dollarization are upside risks, and parallel-market FX volatility is a two-sided risk.