meed-logo

line1 line2 line3
SIGN IN / REGISTER

Lebanon economic recovery postponed

4 June 2024

 

The visit to Lebanon by the IMF in May reveals a stark picture of an economy now in its fifth year of intense turmoil following its October 2019 exchange rate collapse, and one which now faces significant additional headwinds.

The IMF’s end-of-mission statement identified a lack of action on economic reforms as exerting a heavy economic toll, while flagging negative spillovers from fighting on the country’s southern border as an exacerbating factor for the already dire economic and social situation.

Yet, despite this apparent dismal assessment, Lebanon can legitimately claim to have turned a corner last year.

Implementing monetary and fiscal reforms has seen the phasing out of monetary financing, the termination of the electronic foreign exchange platform, tighter fiscal policy, and steps towards the unification of exchange rates.

These measures have helped contain exchange rate depreciation, stabilise the money supply and reduce inflationary pressure, the IMF said.

Nassib Ghobril, chief economist at Beirut-based Byblos Bank, agrees. “Last year was a very good year for Lebanon, the first year where the economy was on track to post a positive growth rate since 2017,” he says.

After the first nine months of 2023, Ghobril’s forecast for real GDP growth was 2%, driven by stellar tourism activity that so far that year had produced knock-on benefits for 14 sub-sectors, in addition to improved activity in the wider industrial, agricultural and services sectors.

“And then 7 October and 8 October happened, and that created a shock that put a hold on this momentum — and that’s continuing,” he says.

Contingent growth

Lebanon’s economic outlook now hinges largely on the outcome of the conflict in Gaza and the related violence between Hezbollah and the Israeli Defence Forces, which has forced widespread displacement of the southern population, besides disrupting agriculture and tourism.

Looking ahead, Ghobril predicts a continuation of the current status quo, which would result in a real GDP contraction of 0.5-1% in 2024, at 40% probability. If the conflict expands – also a 40% probability – then it could realise a more serious contraction of 15-20%.

On the other hand, says Ghobril, in a ceasefire scenario, which he puts at 20% probability, “the sooner it happens, we would have a rebound in growth based on the positive shock, the reconstruction of the south and better visibility”.

Tourism revival, important to Lebanon as a hard currency generator, is highly contingent on a stable security situation, even beyond the southern areas most impacted by the fighting.

Minister of Economy and Trade Amin Salam warned in February that it was unclear if visitors from the Lebanese diaspora and elsewhere, who injected about $5-7bn into the economy last summer, would come to the country this season. In Q1 2024, total passenger numbers at Beirut International airport decreased by 6.7% in year-on-year terms to 1.27 million, according to Banque Audi figures.

The conflict’s direct impact on the south has been stark. According to Banque Audi, more than 6,000 acres of forest and agricultural land have been damaged, up to 2,100 acres completely burned, and more than 60,000 olive trees destroyed.

Meanwhile, an estimated 93,000 people have been internally displaced, contributing to an estimated 75% decline in economic activity in the south. The sense that the Israel-Hamas war has stunted Lebanon’s recovery is hard to avoid, rolling back the progress seen in 2023.

Fiscal stabilisation

The IMF has nevertheless lauded the government’s measures to boost revenue collection from VAT and customs, which it said helped close the fiscal deficit to zero last year.

“Looking ahead, we anticipate the fiscal balance to remain close to zero in 2024, on limited financing options and improved revenue collection permitted by the exchange rate adjustment on custom duties and VAT. CPI inflation is expected to stabilise on lower unsterilised interventions of Banque du Liban,” says Thomas Garreau, an analyst at Fitch Ratings.

Balancing current spending looked to be within reach. The government’s budgeted figures for 2024 envisage public spending amounting to $3.4bn, matched by public revenues of $3.4bn, despite an increase in public sector wages of $40m a month.

Exchange rate stabilisation is a clear win for Lebanon. The pound has been stable at £Leb89,500 to the dollar since the end of July 2023 despite multiple security incidents not related to the conflict in the south of the country.

“That’s still ongoing because the central bank managed last year to sterilise liquidity and Lebanese pounds from the market to reduce the differential between the quasi-official exchange rate of the central bank and the parallel market rate, and to stop the speculation on the currency. So it managed to stop the depreciation of the currency,” says Ghobril.

Foreign exchange reserves, which eroded heavily in the post-2019 crisis period, appear to have steadied. The liquid foreign assets of the central Banque du Liban grew by $382m in Q1 2014, reaching $9.6bn.

As Banque Audi notes, the cumulative growth of $1bn in the central bank’s liquid foreign assets since the end of July 2023 is mostly linked to its refraining from any government finance.

Yet the more lasting changes needed to shift the dial on Lebanon’s economic narrative remain elusive.

Bank deposits are frozen, notes the IMF, and the banking sector is unable to provide credit to the economy, as the government and parliament have been unable to find a solution to the sector’s crisis.

Addressing the banks’ losses while protecting depositors is seen as indispensable to economic recovery.

It does not help that the country has been without a president since October 2022, leaving caretaker Prime Minister Najib Mikati without a full mandate to undertake reforms.

This matters because banking system recovery hinges on political will to implement reforms. Yet the vacuum at the presidential palace leaves little prospect of imminent progress on this front.

“Despite some politicians’ comments, I do not see prospects of an end to the political deadlock as long as the war is ongoing in the south. And even if it suddenly stopped, you would need several months for an overall settlement to materialise on the domestic political front,” says Ghobirl.

The present situation leaves Lebanon politically and economically hobbled, with fears of worse to come due to external events beyond its control.

https://image.digitalinsightresearch.in/uploads/NewsArticle/11853141/main.gif
James Gavin

Register for MEED's guest program now to access this article.

Click here to register
Exclusive from Meed
Related Articles
  • Parsons wins role on Elon Musk-backed Dubai Loop project

    4 May 2026

    US-based Parsons Corporation has been appointed to deliver programme management services for the Dubai Loop transportation system.

    The contract was awarded by Elon Musk-backed firm The Boring Company, which signed a construction agreement with Dubai’s Roads & Transport Authority (RTA) in February.

    Parsons’ scope of work includes independent design verification, stakeholder management, permitting and no-objection certificate (NOC) support, and multidisciplinary design reviews for the project’s first phase.

    The first phase comprises a 6.4-kilometre route with four stations, linking the Dubai International Financial Centre (DIFC) and Dubai Mall.

    Stations will be located at DIFC 2, ICD Brookfield Place, Dubai Mall Zabeel Parking and Burj Khalifa.

    The first phase is expected to cost about AED565m ($154m) and to be delivered within one year after design work and other preparations are completed. Tunnelling is expected to begin in the second half of this year.

    Next phase

    The second phase will connect Dubai World Trade Centre and DIFC with Business Bay.

    The tunnels will extend up to 22km and include 19 stations.

    The total cost across both phases is expected to be around AED2bn ($545m), with completion scheduled within three years.

    The pilot route is expected to serve around 13,000 passengers a day, while the full route is projected to have a capacity of about 30,000 passengers a day.

    The RTA and The Boring Company signed a memorandum of understanding on the sidelines of the World Governments Summit in Dubai in February last year to explore the development of the Dubai Loop transportation system.

    The Dubai Loop is expected to be similar to The Boring Company’s Las Vegas Convention Centre (LVCC) Loop project. The LVCC Loop is a 2.7km underground tunnel system that connects different convention centre halls, reducing walking time across the site to about two minutes.

    The LVCC Loop has been in operation since 2021. It uses Tesla Model 3 cars to carry passengers between five stations. The Boring Company began construction in November 2019 at an estimated cost of $49m.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16672074/main.jpg
    Yasir Iqbal
  • Humain tenders infrastructure for 6GW data centre campus

    4 May 2026

    Saudi artificial intelligence (AI) infrastructure company Humain, owned by the Public Investment Fund (PIF), has issued a tender inviting firms to develop infrastructure for its planned 6GW hyperscale AI data centre campus in Riyadh.

    The project will be delivered on an early contractor involvement (ECI) basis. Under the ECI process, selected contractors are required to submit methodologies and design proposals, after which one team will be selected to deliver the construction works.

    Firms have until 8 May to submit proposals.

    The development will be built on a 24-square-kilometre site in the Al-Saad area in east Riyadh. It will be delivered in two phases across six plots, each with a capacity of 1GW.

    The scope of infrastructure work covers:

    • Construction of 380kV/132kV/33kV electrical distribution network, two substations with a capacity of 500MVA and 200MVA, bulk supply point (2,000MVA)
    • Water network and fire protection systems
    • Sewage treatment plant and wastewater network
    • Stormwater systems
    • Roads
    • Underground cable and fibre optic networks
    • Landscaping works

    The client is being supported by Canadian engineering firm Hatch, France’s Egis and US-based firm JLL.

    Humain was launched in May last year to operate and invest across the AI value chain.

    Humain is building full-stack AI capabilities across four core areas: next-generation data centres, hyper-performance infrastructure and cloud platforms, and advanced AI models, including Allam.

    Also in May 2025, Humain signed preliminary deals with US chipmakers AMD and Nvidia to build multibillion-dollar advanced digital infrastructure in the kingdom.

    AMD said it will invest up to $10bn to deploy 500MW of AI compute capacity in Saudi Arabia over the next five years.

    In October, PIF and Saudi Aramco signed a non-binding term sheet setting out key terms under which Aramco would acquire a minority stake in Humain, with PIF retaining majority ownership.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16671267/main.jpg
    Yasir Iqbal
  • Abu Dhabi selects consortium for 2.5GW Taweelah C IPP

    4 May 2026

     

    Register for MEED’s 14-day trial access 

    A consortium of Al-Jomaih Energy & Water Company (Saudi Arabia) and Sembcorp Industries (Singapore) has been selected to develop the Taweelah C independent power producer (IPP) project in Abu Dhabi.

    The consortium will sign a power purchase agreement (PPA) in mid-May, a source told MEED.

    The combined-cycle gas turbine (CCGT) plant will have a capacity of 2.5GW. It will be located at the Al-Taweelah power and desalination complex, about 50 kilometres northeast of Abu Dhabi city.

    It is understood that China Energy Engineering Corporation (CEEC) will be the engineering, procurement and construction (EPC) contractor.

    Last September, MEED reported that state offtaker Emirates Water & Electricity Company (Ewec) had received three bids for the facility.

    The bidders included:

    • Al-Jomaih Energy & Water Company / Sembcorp Industries
    • Sumitomo Corporation (Japan) / Korea Overseas Infrastructure & Urban Development Corporation / Korean Midland Power
    • Korea Western Power Company / Etihad Water & Electricity (UAE) / Kyuden International (Japan)

    At the time, Mohamed Al-Marzooqi, chief asset development and management officer at Ewec, said the bids would make Taweelah C “one of the lowest tariff CCGT projects in the region”.

    The carbon-capture-ready facility had been scheduled to begin commercial operations in the fourth quarter of 2028.

    This was based on the initial timeline for a PPA to be signed in the fourth quarter of 2025.

    Taweelah C is part of Ewec’s wider programme to support the UAE’s Net Zero by 2050 Strategic Initiative and the Abu Dhabi Department of Energy’s Clean Energy Strategic Target 2035.

    Ewec plans to raise solar power capacity to 18GW and wind capacity to 2.6GW by 2035, while reducing the carbon intensity of its power generation by more than half compared to 2019.

    Ewec is also expanding its low-carbon water desalination capacity, with the Taweelah reverse osmosis (RO) plant already operating as the world’s largest RO facility and additional projects, such as the Mirfa 2 RO and Shuweihat 4 RO, under way.

    By 2030, it expects 95% of Abu Dhabi’s installed water capacity to come from RO technology.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16670622/main0858.jpg
    Mark Dowdall
  • Dubai launches Blue Line metro tunnelling works

    4 May 2026

    Dubai has announced the launch of tunnelling works for the Dubai Metro Blue Line extension project.

    In a post on X, Sheikh Mohammed Bin Rashid Al-Maktoum, UAE Vice President, Prime Minister and Ruler of Dubai, announced the start of operations of the tunnel boring machine (TBM), which the Roads & Transport Authority (RTA) has named ‘Al-Wugeisha’.

    The TBM is 163 metres long, weighs more than 2,000 tonnes and will operate around the clock. The post added that its average excavation rate ranges from 13 to 17 metres a day.

    The Blue Line will connect the existing Red and Green lines. It will be 30 kilometres (km) long, with 15.5km underground and 14.5km above ground.

    The line will have 14 stations, seven of which will be elevated. There will be five underground stations, including one interchange station, and two elevated transfer stations connected to the existing Centrepoint and Creek stations.

    In December 2024, the RTA awarded a AED20.5bn ($5.5bn) main contract for the construction of the project to a consortium comprising Turkiye’s Limak Holding and Mapa Group, along with the Hong Kong office of China Railway Rolling Stock Corporation (CRRC).

    The consortium is responsible for all civil works, electromechanical works, rolling stock and rail systems. After completing the project, it will assist with maintenance and operations for an initial three-year period.

    According to an official statement, the Blue Line will have a capacity of 46,000 passengers an hour in both directions.

    The project is scheduled for completion in September 2029.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16670584/main.jpeg
    Yasir Iqbal
  • Firms submit Jeddah distribution centre bids

    4 May 2026

     

    Contractors submitted bids on 26 April for an estimated SR140m ($37m) contract to build a distribution centre in Jeddah.

    Saudi Logistics Services Company (SAL) launched the tender on 11 March, as previously reported by MEED. The project will cover an area of about 37,000 square metres. Egyptian firm Cosmos-E Engineers & Consultants has been appointed as the project consultant.

    This tender follows the start of construction by Egyptian contractor Rowad Modern Engineering, a subsidiary of Elsewedy Electric Group, on the expansion of SAL’s facilities at King Khalid International airport in Riyadh. The scope of work includes rehabilitating and upgrading existing infrastructure, as well as constructing new supporting facilities and services.

    SAL also launched the tendering process in September last year for its SR4.2bn ($1bn) logistics zone in northern Riyadh, MEED previously reported. UAE-based Global Engineering Consultants is the consultant for that development.

    The logistics hub aims to meet demand for customised warehouses near King Khalid International airport and the Riyadh Metro. The project aligns with Vision 2030 and the National Transport & Logistics Strategy, which aims to strengthen the kingdom’s logistics sector and enhance Saudi Arabia’s position as a global logistics hub.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16670338/main.gif
    Yasir Iqbal