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
  • Local contractor wins $143m Jeddah sewage contracts

    19 February 2026

    Saudi Arabia’s National Water Company (NWC) has awarded two sewage network contracts worth a combined SR536.3m ($143m) to local contractor Civil Works Company.

    The projects will be implemented over 32 months from site handover and will serve northern Jeddah districts.

    The first contract, valued at SR278.5m ($74.3m), covers incomplete main lines and secondary sewage networks serving parts of the Al-Bashair, Al-Asala and Al-Falah neighbourhoods.

    The scope includes pipelines ranging from 200mm to 800mm in diameter with a total length of about 54.8 kilometres (km).

    The package also includes sewage tunnels with diameters ranging from 600mm to 1,800mm and a total length of approximately 6.5km. Works will also serve the Taybah, Abhar Al-Shamaliyah and Al-Hamdaniyah districts.

    The second contract is valued at SR257.8m ($68.8m). It covers the implementation of main lines and sub-networks to serve part of the Al-Hamdaniya neighbourhood.

    The works include pipelines ranging from 200mm to 1,500mm in diameter with a total length of about 78.5km. The scope also includes horizontal drilling works for sewage tunnels with diameters from 1,200mm to 1,400mm and a total length of approximately 205 metres.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15699620/main.jpg
    Mark Dowdall
  • Veolia wins Jordan water services contract

    18 February 2026

    Register for MEED’s 14-day trial access 

    France's Veolia has signed a four-year performance-based management contract with the Water Authority of Jordan to support water and wastewater services in the country’s northern governorates.

    Under the contract, Veolia will provide operations, maintenance and management services to Yarmouk Water Company, the public utility responsible for water supply and wastewater services in the region.

    The agreement covers Irbid, Jerash, Ajloun and Mafraq, an area spanning nearly 30,000 square kilometres and covering about 3 million people.

    The scope includes water and wastewater operations, maintenance, billing and collection, and customer service.

    According to the firm, the performance-based structure prioritises measurable improvements, including service delivery, cost efficiency and revenue management.

    The company said it will deploy technical and management specialists to support operations, rehabilitation works and investment initiatives.

    The contract builds on Veolia’s existing operational role in Jordan’s water sector. The company operates the Disi-Amman scheme, which supplies about 100 million cubic metres of drinking water a year, under an operations and maintenance contract.

    It also operates the Al-Samra wastewater treatment plant, which produces about 133 million cubic metres of treated wastewater annually for agricultural reuse.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15684109/main0535.jpg
    Mark Dowdall
  • SAR tenders phosphate rail project management deal

    18 February 2026

     

    Register for MEED’s 14-day trial access 

    Saudi Arabian Railways (SAR) has floated another tender inviting firms to bid for a contract covering the project management consultancy services for its Phosphate 3 rail programme.

    The tender was issued on 15 February with a bid submission deadline of 5 April.

    The contract duration is 54 months.

    The latest tender follows SAR floating a multibillion-riyal tender to double the tracks on the existing phosphate transport railway network connecting the Waad Al-Shamal mines to Ras Al-Khair in the kingdom’s Eastern Province.

    The tender – covering the second section of the track-doubling works, spanning more than 150 kilometres (km) – was issued on 9 February. The bid submission deadline is 15 April.

    Earlier this month, MEED reported that SAR received bids from contractors on 1 February for the project’s first phase, which spans about 100km from the AZ1/Nariyah Yard to Ras Al-Khair.

    The scope includes track doubling, alignment modifications, new utility bridges, culvert widening and hydrological structures, as well as the conversion of the AZ1 siding into a mainline track.

    The scope also covers support for signalling and telecommunications systems.

    The tender notice was issued in late November with a bid submission deadline of 20 January.

    Switzerland-based engineering firm ARX is the project consultant.

    MEED understands that SAR is expected to tender a total of four packages for the phosphate railway line.

    The other packages expected to be tendered shortly include the depot and the systems package.

    In 2023, MEED reported that SAR was planning two projects to increase its freight capacity, including an estimated SR4.2bn ($1.1bn) project to install a second track along the North Train freight line and construct three new freight yards.

    Formerly known as the North-South Railway, the North Train is a 1,550km-long freight line running from the phosphate and bauxite mines in the far north of the kingdom to the Al-Baithah junction. There, it diverges into a line southwards to Riyadh and a second line running east to downstream fertiliser production and alumina refining facilities at Ras Al-Khair on the Gulf coast.

    Adding a second track and the freight yards will significantly increase the network’s cargo-carrying capacity and facilitate increased industrial production. Project implementation is expected to take four years.

    State-owned SAR is also considering increasing the localisation of railway materials and equipment, including the construction of a cement sleeper manufacturing facility.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15684025/main.jpg
    Yasir Iqbal
  • PIF-backed firm signs worker accommodation deal

    17 February 2026

    Register for MEED’s 14-day trial access 

    Saudi Arabia's Smart Accommodation for Residential Complexes Company (Sarcc) has signed an agreement with Riyadh-based Mawref Company to develop a 12,000-bed worker accommodation project in North Riyadh.

    The project will cover about 120,000 square metres (sq m), with a total built-up area of 150,000 sq m.

    The development is expected to cost over SR669m ($178m), with the first phase slated for completion in 2029.

    Sarcc is backed by the Public Investment Fund (PIF), the Saudi sovereign wealth vehicle.

    The agreement follows Sarcc signing another agreement in September last year with privately-owned local firm Tamimi Global Company to explore collaboration in developing worker accommodation facilities in the kingdom.

    The PIF launched Sarcc in October 2024 with the aim of developing and operating staff housing and accommodation assets in the kingdom.

    Sarcc will develop and operate the staff accommodation facilities at major construction projects in Saudi Arabia.

    The company will seek opportunities to invest in the sector to strengthen staff housing standards. Sarcc will also look to engage the private sector by enabling investment and partnership opportunities in sectors including construction, catering, transportation and retail.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15672262/main.gif
    Yasir Iqbal
  • KBR wins 10-year maintenance contract from Petro Rabigh

    17 February 2026

    Register for MEED’s 14-day trial access 

    Saudi Arabia's Rabigh Refining & Petrochemical Company (Petro Rabigh) has awarded US-based consultant KBR a 10-year contract to provide maintenance services covering the company’s polymer plants in Rabigh, on the kingdom’s Red Sea coast.

    “This [contract award] marks a major step in Petro Rabigh’s transformation journey, supporting safer operations, stronger reliability and long-term improvement across its facilities,” Petro Rabigh said in , without providing further details.

    Work on the operations and maintenance contract will be executed by KBR’s  business line, which operates under the Houston-headquartered firm’s Technology Solutions portfolio, sources told MEED.

    Prior to this contract, in March 2024, Petro Rabigh awarded KBR a similar five-year asset condition monitoring programme contract. As part of that job, KBR is to provide predictive maintenance services at Petro Rabigh’s main plant.

    Petro Rabigh was originally established in 1989 as a basic topping refinery with crude oil processing facilities, located in Rabigh, 165 kilometres to the north of Jeddah in Mecca Province.

    Saudi Aramco and Japan’s Sumitomo Chemical Company formed an equal joint venture in 2005 to transform the Petro Rabigh crude oil refining complex into an integrated refinery and petrochemicals complex, with the strategic objective of expanding Saudi Arabia’s annual production capacity of refined products and petrochemicals.

    Three years after the creation of the Petro Rabigh joint venture, the partners floated 25% of its shares in an initial public offering on the Saudi Stock Exchange (Tadawul) in 2008, following which Aramco and Sumitomo Chemical each held 37.5% shares in Petro Rabigh, with the remaining shares listing on the Tadawul.

    In October last year, however, Aramco completed the acquisition of an additional 22.5% stake in Petro Rabigh from Sumitomo Chemical. Following the completion of the transaction, valued at $702m or SR7 a share, Aramco became the majority shareholder in Petro Rabigh, with an equity stake of 60%, while Sumitomo retains an interest of 15%. The remaining 25% shares of Petro Rabigh continue to trade on the Tadawul.

    ALSO READ: Petro Rabigh and Indian firm to study joint project investment

    Following the formation of the Petro Rabigh joint venture in 2005, Aramco and Sumitomo Chemical launched the expansion of the refining facility into an integrated refining and petrochemicals complex in 2006, investing $9.8bn in the project, 60% of which was secured through external financing. Engineering, procurement and construction works on phase one were completed in 2009, with the integrated downstream complex entering operations in November of that year.

    The Petro Rabigh downstream complex consists of a topping refinery that has a 340,000 barrel-a-day (b/d) crude distillation unit, a 47,000 b/d hydrotreater, a 12 million cubic-feet-a-day hydrogen plant, a 75,000 b/d naphtha merox unit and a 60,000 b/d kerosene merox unit, along with supporting utilities, product tankage and a marine terminal.

    Aramco and Sumitomo Chemical initiated Petro Rabigh’s phase two expansion project, valued at $8bn, in 2014. The second expansion phase was commissioned in 2018 and added 15 chemicals plants to the Petro Rabigh complex, raising the facility’s total production capacity to 18.4 million tonnes a year (t/y) of petroleum-based products.  

    The expansion also increased Petro Rabigh’s capacity to process an additional 30 million cubic feet a year of ethane into 2.4 million t/y of ethylene and propylene-based derivatives, and achieved a naphtha output of 3 million t/y.

    Expansion of the main existing chemicals plant and the establishment of a clean fuels complex comprising polyether polyols, naphtha treating and sulphur recovery units were also part of the phase two project.

    Photo credit: Petro Rabigh on LinkedIn

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15670196/main5008.jpg
    Indrajit Sen