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.
Register for MEED's guest program now to access this article.
Exclusive from Meed
-
Bahrain extends deadline for Hawar Island water station25 November 2025
-
November 2025: Data drives regional projects25 November 2025
-
Bahrain pursues reform amid strain25 November 2025
-
Chinese firms expand oil and gas presence25 November 2025
-
UK firm wins Saudi airport masterplan update deal25 November 2025
All of this is only 1% of what MEED.com has to offer
Subscribe now and unlock all the 153,671 articles on MEED.com
- All the latest news, data, and market intelligence across MENA at your fingerprints
- First-hand updates and inside information on projects, clients and competitors that matter to you
- 20 years' archive of information, data, and news for you to access at your convenience
- Strategize to succeed and minimise risks with timely analysis of current and future market trends
Related Articles
-
Bahrain extends deadline for Hawar Island water station
25 November 2025
Bahrain’s Electricity & Water Authority (Ewa) has extended the bid submission deadline for the main contract to build a new water distribution station on Hawar Island.
The deadline, initially set for 23 November, has been moved to 7 December.
The $15m project covers the construction of two steel ground storage tanks with a capacity of one million gallons each, pumping stations, motors, pipelines and associated facilities.
The scheme forms a key part of Bahrain’s wider plans to develop Hawar Island, which currently has limited utility infrastructure and relies on water transported from the mainland.
The government is advancing tourism-led investment on the island, including eco-resorts and hospitality developments that require reliable potable water supplies.
The tender is linked to Ewa’s ongoing procurement for a new seawater reverse osmosis (SWRO) desalination plant on Hawar.
The engineering, procurement and construction contract for the SWRO facility, designed to produce one million imperial gallons a day, is currently out to tender, with bids due on 30 November.
According to Ewa, the desalination plant will connect with two related contracts.
One of these covers the construction of the new water distribution station, while the second covers offshore seawater intake and outfall systems.
The main desalination contractor will be required to ensure its design and construction align with these works so that all three components function together as one integrated system.
https://image.digitalinsightresearch.in/uploads/NewsArticle/15149229/main.jpg -
November 2025: Data drives regional projects
25 November 2025
Click here to download the PDF
Includes: Top 10 global contractors | Brent Spot Price | Construction output
MEED's 2025 EPC contractor ranking
MEED’s December 2025 report on Bahrain includes:
> COMMENT: Manama pursues reform amid strain
> GVT & ECONOMY: Bahrain’s cautious economic evolution
> BANKING: Mergers loom over Bahrain’s banking system
> OIL & GAS: Bahrain remains in pursuit of hydrocarbon resources
> POWER & WATER: Bahrain advances utility reform
> CONSTRUCTION: Bahrain construction faces major slowdown
> TRANSPORT: Air Asia aviation deal boosts connectivityTo see previous issues of MEED Business Review, please click herehttps://image.digitalinsightresearch.in/uploads/NewsArticle/15149339/main.gif -
Bahrain pursues reform amid strain
25 November 2025
Commentary
John Bambridge
Analysis editorCautious optimism defines Bahrain’s current economic moment as the country presses ahead with a broad agenda of diversification, reform and targeted investment. Yet the more assertively Manama moves to reshape its future, the more the tension between its ambition and its fiscal constraints becomes evident as the defining feature of its policymaking.
Bahrain’s projects sector, which has now been shrinking for the past seven years, is emblematic of the country’s constricted spending. This year, contract awards have fallen to their lowest value in a decade. This signals a decisive shift to a more disciplined investment strategy aligned with fiscal realities and a more selective approach to forward-looking capital spending.
The diminished projects market is in turn a challenge for the financial sector, which now faces a receding pool of project financing and other contracting loans. This is giving further impetus to the potential consolidation of local lenders in the overbanked market, which is also beset by thinning margins, rising compliance costs and pressure to scale amid financial system modernisation. While it could create short-term pain, consolidation should boost the financial health of legacy lenders and provide stability in a sector increasingly being defined by new digital banking models and innovation.
Yet even as some sectors change, Bahrain’s government remains deeply reliant on hydrocarbons, which continues to drive exploration, including in the technically complex Khaleej Al-Bahrain basin. These activities reflect the practical need to maintain oil revenues in the medium term and, should additional recoverable reserves be discovered, a potent source of optimism.
Manana is meanwhile looking to overhaul the utilities sector by creating a dedicated regulator and new national operator. The reforms should make space for greater private participation, drawing more capital into power and water projects while improving efficiency and reducing state expenditure in an aspirationally positive step towards greater long-term sustainability.
Even as fiscal concerns narrow Manama’s policy options, it continues to secure strategic wins. A new aviation agreement with Air Asia establishes Bahrain as a regional hub for one of Asia’s largest low-cost carriers. This move opens new connectivity corridors and, alongside the renewal of direct Gulf Air routes to the US, reinforces Bahrain’s position as a gateway between regions, promising benefits for tourism, logistics and services.
Overall, Bahrain’s economic trajectory remains delicately balanced – marked by reform-driven progress yet tempered by fiscal constraint. But in threading this needle, Manama shows that cautious optimism can still be a powerful catalyst for change.
MEED’s December 2025 report on Bahrain includes:
> GVT & ECONOMY: Bahrain’s cautious economic evolution
> BANKING: Mergers loom over Bahrain’s banking system
> OIL & GAS: Bahrain remains in pursuit of hydrocarbon resources
> POWER & WATER: Bahrain advances utility reform
> CONSTRUCTION: Bahrain construction faces major slowdown
> AVIATION: Bahrain signs game-changer aviation deal with Air AsiaTo see previous issues of MEED Business Review, please click herehttps://image.digitalinsightresearch.in/uploads/NewsArticle/15109785/main.gif -
Chinese firms expand oil and gas presence
25 November 2025
> This package also includes: Larsen & Toubro climbs EPC contractor ranking
Chinese contractors have been present in the oil and gas projects market in the Middle East and North Africa (Mena) region since the turn of this century, but largely remained on the fringes. In a hydrocarbons market that has traditionally been dominated by European and American contractors, and those from Japan and South Korea, Chinese firms have become a rising force, especially since the start of the decade.Economic competitiveness in bid battles, significant improvement in engineering and technological capabilities and commitment to execution schedules have been primary factors behind the success of Chinese contractors in the regional oil and gas projects market since 2020.
Competitive edge
Traditionally, Chinese engineering, procurement and construction (EPC) contractors have enjoyed a lower cost base than their international competitors. This comes from lower manpower costs, access to cheaper materials and equipment, and financial support from state banks.
In addition, Chinese firms have typically had a different attitude to risk than many other contractors. Instead of seeking to turn a profit on specific projects, Chinese firms have entered markets cautiously and, as their knowledge of the local market grew, built a commanding long-term position.More recently, the edge that Chinese contractors enjoy has come from the technical experience they have gained from delivering large-scale, complex projects in their domestic market. While in the past Chinese contractors were only considered capable of delivering basic construction work, they now have some of the best project references in the world.
Regional leaders
Chinese EPC contractors have strengthened their performance in the Mena oil and gas projects market, particularly since the end of the Covid-19 pandemic. Since 2023, the combined value of projects won by Chinese firms has consistently remained well over $13bn, with them winning key contracts on major projects.
The largest EPC scheme under execution by a Chinese contractor in the region is on a project to maintain and increase the oil production potential of the Bul Hanine offshore oil field development in Qatar. China Offshore Oil Engineering Company won contracts worth $4bn for the two main EPC packages of the project in the third quarter of 2025.Also this year, Abu Dhabi’s Taziz awarded the main EPC contract to build a complex of specialty chemicals plants in the Taziz Industrial Chemicals Zone at Ruwais Industrial City to China National Chemical Engineering & Construction Corporation Seven (CC7).
The EPC contract is valued at $1.99bn, with work expected to be completed by Q4 2028. The chemicals cluster, known as Project Salt, will produce 1.9 million tonnes a year of marketable polyvinyl chloride (PVC), ethylene dichloride (EDC), vinyl chloride monomer (VCM) and caustic soda.
Chinese contractors have also enjoyed success in Saudi Arabia, with Aramco having awarded several key EPC contracts to Chinese firms since 2023. China Petroleum Engineering & Construction Company, Sepco and Sinopec Petroleum Services are executing EPC works on four out of the 17 packages of the third expansion phase of Aramco’s Master Gas System project.
Sinopec Group has played a significant role in Aramco’s Jafurah unconventional gas development in Saudi Arabia. In a consortium with Spanish contractor Tecnicas Reunidas, in 2024 Sinopec won packages one and two of the Riyas natural gas liquids scheme, part of the second Jafurah unconventional gas expansion phase. The combined value of the two EPC contracts was $3.2bn.
Just weeks after securing these EPC contracts, the consortium also won the contract to deliver the entire scope of work on the scheme’s third expansion phase, valued at $2.24bn.
In Iraq, China Petroleum Engineering (CPE) won a major contract in August to carry out EPC works on a package covering a major seawater transmission pipeline to be built in Basra as part of the larger Common Seawater Supply Project, which is one of four main components of the estimated $10bn Gas Growth Integrated Project masterplan.
Work on the $2.52bn contract will be carried out by CPE’s engineering arm, China Petroleum Pipeline Engineering.
China has built up extensive resources, from skilled personnel to technical know-how. As the domestic market shows signs of slowing, these resources are being deployed internationally, supporting the growing presence of Chinese contractors in the Mena region.
https://image.digitalinsightresearch.in/uploads/NewsArticle/15149182/main.gif -
Ineco appointed for Spain-Morocco tunnel study25 November 2025
Spanish engineering firm Ineco has been commissioned to conduct an exploratory tunnel study to validate the feasibility of the railway connection linking Spain and Morocco.
According to reports in Spanish media, the $1m contract will establish a detailed technical roadmap for the project.
Ineco’s scope of work includes the preliminary design of the exploratory tunnel, revisions to previous studies, and a comprehensive update of the route, geology, geotechnical conditions, security systems, terminals and associated installations.
Ineco will validate the critical geological conditions of the Strait, particularly in the areas where the project’s greatest risks are located.
The study is expected to be completed by August next year.
The latest development comes after German company Herrenknecht completed its study in October. Herrenknecht said it found the project feasible to undertake due to the availability of the technology needed to execute it.
The media reports added that clients will further study the project and make a final decision in 2027 regarding tendering.
Recent developments
MEED reported in August that Ineco had secured an estimated €350,000 ($409,000) contract to carry out a financial feasibility study for the proposed infrastructure.
UK-based Vodafone also won a contract to provide advanced telecommunications support to teams working on the project.
These developments followed the appointment of Herrenknecht in January for a €296,400 ($307,483) contract to conduct a drilling feasibility study.
The Spanish government revived the Morocco-Spain undersea rail link in June last year, after allocating about $2.5m for a renewed design study.
Project background
The project, originally launched in 2003, was put on hold following the 2008 financial crisis. It has undergone several rounds of feasibility studies, but remains in the planning phase after nearly two decades of funding-related delays.
The proposed design includes a double-track railway and a service tunnel extending 38.5 kilometres (km) between Tarifa in Spain and Tangier in Morocco. Of this, 28km will run beneath the Mediterranean Sea at a maximum depth of 475 metres.
Each single-track tunnel will have an inner diameter of 7.9 metres, while the service gallery will be 6 metres in diameter.
The project is being jointly developed by Morocco’s National Society for Strait of Gibraltar Studies and Spain’s Sociedad Espanola de Estudios para la Comunicacion Fija a Traves del Estrecho de Gibraltar.
In 2006, Swiss engineering firm Lombardi Engineering was selected to design the tunnel. Preliminary studies were completed two years later.
https://image.digitalinsightresearch.in/uploads/NewsArticle/15148660/main.jpg