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.
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Gulf seizes AI opportunities
30 May 2025
This package also includes: Data centres churn investments
Opportunities to build digital infrastructure – mainly data centres – to support the Gulf’s ambitious artificial intelligence (AI) initiatives jumped in value to about $80bn in mid-May, up from around $20bn at the end of April, thanks to the gigawatt-scale AI campuses announced during US President Donald Trump’s Gulf visit.
These projects provided the final piece of a puzzle relating to the massive power generation capacity buildout in Saudi Arabia and the UAE, which have been overhauling their electricity systems in line with their energy diversification, economic expansion and net-zero targets.
The planned 5GW AI campus in Abu Dhabi is expected to occupy 26 square kilometres of land when completed. Experts say that in countries with more temperate weather, such a facility would require power equivalent to the consumption of nearly three million homes.
“This is as much a story about electricity as it is about AI,” Karen Young, senior research scholar at Columbia University’s Centre on Global Energy Policy, tells MEED.
She adds that the UAE leadership was “extremely prescient” to invest in nuclear power many years ago, perhaps understanding that a surplus of electricity would be key to future growth and industrial policy.
“But these things are expensive, and are easier to permit and build in the UAE because of the concentration of funding and decision-making,” she says. “It's proving a major advantage in the AI race and construction of data centres.”
Attractive asset class
Data centres are often considered part utility assets – similar to delivering gas, electricity, water and telecoms services – and part real estate assets, due to the rents they yield from tenants.
“Yet a lot of the talk … now concerns how investors look at data centres as assets,” a partner at an international law firm with an office in Riyadh says, “because they are neither utility nor real estate”.
However they are defined, the gap in digital infrastructure to support AI advancements is driving investments in data centre projects in the Middle East.
“The opportunity is ripe,” says Sherif Elkholy, partner and head of Middle East and Africa at UK-based private equity and investment firm Actis.
In addition to the sovereign wealth funds in Saudi Arabia and Abu Dhabi, family offices such as Saudi Arabia’s Vision Invest and international private equity firms are getting their feet wet in the rapidly expanding Gulf data centre market.
Actis, for example, is looking at credible local partners, with a platform or portfolio of operating as well as greenfield assets. US-based KKR acquired a stake in UAE-based Gulf Data Hub earlier this year.
“Historically, the region has been an exporter of capital, but today there is a concerted effort to attract foreign direct investments, particularly into Saudi Arabia. The strategy now is how can the region become an importer of value-added capital to support their 2030 visions?” says Elkholy.
Part of the answer lies in opening the sector to private investors and capital. According to Elkholy, the Middle East has very ambitious energy transition, digital infrastructure, desalination and district cooling projects, and the private sector is now playing a central role in delivering these.
“The mood of international investors has been to avoid risks due to global uncertainties, such as we have now, but the reality is there is a major infrastructure gap, and addressing this, especially given the 2030 targets, requires private sector participation.”
Data sovereignty
Uncertainty over data sovereignty issues across the Gulf states is yet another issue investors have had to grapple with.
Although the GCC countries have had stringent data localisation laws in place for almost a decade now, that does not seem to have dampened growing investments in data centre projects in the region, according to Nic Roudev, who leads UK-based legal firm Linklaters’ TMT practice in the Middle East.
“While data localisation requirements prevent the most efficient operational configurations, where data centres capacity is deployed in one country to service demand across the entire region, it also presents hyperscalers with opportunities to build out robust operations in each of the major GCC countries,” says Roudev.
This allows firms to take advantage of incentives for local presence, such as access to government procurement contracts and financing opportunities.
“Demonstrating commitment to the particular country’s economy by establishing and growing local operations also allows data centre investors to build durable strategic partnership relations with regulatory and government authorities, which can lead to a decrease in long-term regulatory and business uncertainty,” the executive says.
The heat and climate effects will continue to be a thorn for future Gulf data centre development and investments
Karen Young, Columbia University’s Centre on Global Energy PolicyImproving regulations
It's not all perfect, though, Young suggests, citing that the heat and climate effects will continue to be a thorn for future Gulf data centre development and investments.
“There is also the rather poor track record of exporting, trading and sharing electricity within the UAE and the GCC, and thinking about export to third countries… so that makes the idea of data centres and even data traffic via cables a little more complicated,” she explains.
From a regulatory viewpoint, Roudev says the main unique risk factors that data centre investors in the GCC typically have to wrestle with stem mostly from the usually non-transparent and frequently hard to predict legislative and regulatory rule-making and enforcement.
However, Roudev also notes that “in recent years there has been a marked trend in both the UAE and Saudi Arabia for increasing transparency by opening draft laws and regulations to public consultations and actively soliciting input from key industry stakeholders.”
A good example of this in Saudi Arabia has been the development of one of the key regulatory instruments for cloud computing services, which went through “a series of sudden and significant revisions, and the data protection law, which underwent unexpected but considerable revisions after remaining suspended for a year”.
Regulatory enforcement actions in the GCC, which have traditionally not been publicised, have also shifted, with an evident attempt in recent years to increase transparency and predictability of enforcement by authorities in both countries, concludes Roudev.
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Meraas awards Madinat Jumeirah construction deal
30 May 2025
Dubai-based real estate developer Meraas Holding, part of Dubai Holding, has awarded a AED300m ($82m) contract for the main construction works on Elara, which is Phase 7 of the Madinat Jumeirah Living masterplan in Dubai.
The contract was awarded to the local firm Al-Sahel Contracting Company.
Elara will feature three residential towers offering 234 apartments.
Construction is expected to start immediately, and the project is scheduled for completion by the end of 2026.
Earlier this month, Meeras awarded Bhatia General Contracting a contract to construct the fourth phase of the Nad Al-Sheba Gardens community in Dubai, worth AED690m ($188m).
The scope of the contract covers the construction of 92 townhouses, 96 villas and two pool houses.
In March, Meraas awarded Abu Dhabi-based Arabian Construction Company an estimated AED2bn contract ($544m) to build its Design Quarter residential project in Dubai Design District.
The development will comprise three buildings offering over 558 residential apartments. Construction is expected to be completed in 2027.
The UAE’s heightened real estate activity is in line with UK analytics firm GlobalData’s forecast that the construction industry in the country will register annual growth of 3.9% in 2025-27, supported by investments in infrastructure, renewable energy, oil and gas, housing, industrial and tourism projects.
The residential construction sector is expected to record an annual average growth rate of 2.7% in 2025-28, supported by private investments in the residential housing sector, along with government initiatives to meet rising housing demand.
MEED’s May 2025 report on the UAE includes:
> COMMENT: UAE is poised to weather the storm
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> DATABANK: UAE growth prospects head northhttps://image.digitalinsightresearch.in/uploads/NewsArticle/13981791/main.png -
Hydrogen’s future may not be so green
29 May 2025
Commentary
Jennifer Aguinaldo
Energy & technology editorMuch has changed in the region’s hydrogen landscape since the first projects were launched in a flurry of excitement.
Initially, in anticipation of demand for low-carbon fuel arising from Asia and Europe by the early 2030s, aspiring green hubs such as Egypt, Morocco, Abu Dhabi and Saudi Arabia announced batches of large-scale green hydrogen and ammonia projects.
Two or three of these have progressed. At Neom, the world’s largest and most ambitious green hydrogen and ammonia production plant is under construction. The $8.4bn project reached financial close in May 2023, achieved a 60% completion rate in December, and appears on track to meet the company’s 2026 target commercial operation date.
In Oman, meanwhile, where the sultanate’s third hydrogen block land auction is ongoing, developers and downstream companies are expected to submit bids sometime this year.
However, across the Middle East and North Africa region, most of the projects announced in the past few years remain in the concept or preliminary design stages, while the rest have not moved beyond signing the memorandums of understanding.
With the exception of Oman, there have been few announcements on new green hydrogen projects in the region over the past 12 months.
Shareholders have even revolted over clean hydrogen plans. Seifi Ghasemi, former CEO of Air Products, which co-owns the Neom Green Hydrogen Company, along with Saudi utility developer Acwa Power and gigaproject developer Neom, was removed from the firm’s board earlier this year, with sources citing the company shareholders’ opposition to the firm’s green hydrogen plans.
In addition to being a co-owner, Air Products is also the main offtaker, contractor and systems integrator of the Neom green hydrogen project.
Cost issue
The main issue for these projects remains the cost of production, according to Michael Liebreich, managing partner at UK firm EcoPragma Capita.
“If green ammonia is going to work anywhere, it should be [in] Oman and the GCC,” he explains. However, the London-based executive and entrepreneur has doubts about green hydrogen’s economics.
Earlier this year, his conversations with “a number of participants in green hydrogen and ammonia projects” indicate that the costs they are able to achieve today come to around $6 a kilogram (kg), and potentially $4/kg in five years for projects coming online in the early 2030s.
“They talk about $3/kg or $2.5/kg, but you could only get there by offering incentives such as subsidies, concessionary finance, free land, free infrastructure and offtake guarantees,” notes Liebreich.
While the region has very cheap solar power, a $15 a megawatt-hour (MWh) solar tariff does not necessarily lead to cheap hydrogen because it is only available roughly 25% of the time. To get to 24/7, one needs batteries, and in jurisdictions like Abu Dhabi, this will take the price to roughly $50/MWh.
Adds Liebreich: “And since you need 50kWh of power per kilogram of hydrogen, assuming an 80% efficiency, that means you have $2.50/kg just of electricity cost. No capex, no maintenance, no compression, no pipelines, nothing. So $4/kg looks like being a floor price for a long time; $3/kg would be the outside edge of achievable.”
Meanwhile, fossil gas at around $1-1.50/kg creates an extra cost of $2.50/kg, which means that anyone producing a million tonnes of green hydrogen a year has to cover the extra cost of $2.5bn a year and find at least 15 years of guaranteed offtake to get the project built.
“You need to secure 15 years of support to close the cost gap of $37.5bn. You need it guaranteed upfront by someone with a bullet-proof balance sheet – so that’s either a government or sovereign wealth fund.”
The near-impossibility of exporting liquid hydrogen to Europe due to prohibitive costs and inefficiency of liquefying the hydrogen should also be considered.
In comparison, a more feasible option could be putting ammonia on a ship to Europe, where it could benefit from a Carbon Border Adjustment Mechanism (CBAM) at the same price as a tonne of carbon under EU-ETS.
According to Liebreich, under this scenario, each kilogram of green hydrogen reduces emissions by around 9kg, and the EU-ETS price today is €72 ($81)/tonne.
“So each kilogram of green hydrogen will avoid a carbon price of $0.009 x 81, which is equal to $0.72. That closes your gap, so a tonne of green ammonia is now only $320 more than a tonne of grey, or only double the price,” Liebreich explains.
“Look at it another way, if you want to export 1 million tonnes of hydrogen as ammonia a year into Europe, you are still looking at an annual cost gap of $1.8bn after taking the EU-ETS CBAM into account. And you need a 15-year deal, so that’s $27bn,” he notes, under the assumption one can get the hydrogen price down to $4/kg.
Far from being rosy, Liebreich concludes that green hydrogen-wise, the region could be heading down a blind alley. “There will be almost no import market for green hydrogen or its derivatives because, in the best scenario, they will remain too expensive.”
Bright side
Liebreich’s dour forecast collides with the vision of most regional stakeholders that net zero by 2050 will not be possible without low-carbon, and particularly green, hydrogen and its derivatives, including green ammonia, methanol and sustainable aviation fuel.
Mohammad Abdelqader El-Ramahi, chief green hydrogen officer at Abu Dhabi Future Energy Company (Masdar), for instance, told MEED in October that green hydrogen is the most important driver and enabler of net zero and decarbonisation. “Very few people know that electrification alone can address no more than 30% of our decarbonisation [needs], even if we install all sorts of renewable sources,” he said.
Abu Dhabi intends to replicate its success in the energy sector’s previous four waves – oil and gas in the 1960s, liquefied natural gas and anti-flaring in the 1970s, renewable energy in the 2000s and nuclear energy in the 2020s – in the sector’s fifth low-carbon hydrogen wave.
The list of Masdar’s potential green hydrogen partners includes Ireland-headquartered Linde; France’s TotalEnergies; the UK’s BP; Austria’s Verbund; and Japan’s Mitsui, Osaka Gas, Mitsubishi Chemical, Inpex and Toyo Gas.
Despite the slow progress and major reality check, hope proverbially springs. “Green hydrogen is the inevitable future fuel,” El-Ramahi asserted.
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Wood wins Iraq oil and gas contracts
29 May 2025
The UK-based engineering company Wood has been awarded a series of decarbonisation contracts with a total value of about $100m for flare gas reduction and carbon efficiency project solutions across Iraq’s largest oil fields.
Under the terms of the contracts, Wood will deliver brownfield engineering, procurement and construction (EPC) and modifications solutions to “enhance operational efficiency and minimise environmental impacts”, according to statement released by the company.
In its statement, Wood said that the projects would support Iraq’s commitment to reduce gas flaring by 78% by the end of 2025.
Wood has already provided decarbonisation solutions for major operators in Iraq and has implemented the country’s largest flare gas reduction programme to date.
Ellis Renforth, Wood’s president of operations for Europe, Middle East and Africa, said: “We are working in partnership with our clients to achieve Iraq’s energy ambitions and deliver a sustainable energy future for the country.
“Wood Iraq has extensive knowledge of our clients’ infrastructure, operations and goals, enabling them to improve operational efficiency and reduce the impact of gas flaring while maintaining critical production.”
The reimbursable contracts will be delivered by Wood’s team in Iraq and the UAE.
The company said it would recruit 60 new employees to support the successful delivery of these projects.
Money problems
Earlier this month, Wood announced that its chairman, Roy Franklin, would step down from the board.
The move comes amid ongoing financial problems at the engineering company, which is working on projects worth tens of billions of dollars across the Middle East and North Africa region.
At the end of April, Wood Group’s shares were suspended on the London Stock Exchange because the company did not publish its accounts for 2024 on time.
Wood employs over 4,000 people in the Middle East, having increased its headcount by 500 in 2024.
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> COMMENT: Iraq maintains its pace, for now
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> PIPELINES: Revival of Syrian oil export route could benefit Iraq
> POWER: Iraq power sector turns a page
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BP considers Algeria lubricants plant project
29 May 2025
The UK-based oil and gas company BP is considering developing a facility in Algeria to produce products for its Castrol lubricants business, according to industry sources.
BP has been considering developing the facility for some time, but has yet to make a final decision on whether to proceed with the project.
One source said: “BP is continuing to evaluate the business case for developing the facility.”
BP’s upstream business exited Algeria with the sale of its assets to Italy’s Eni in a deal announced in September 2022.
That deal included selling its interests in the gas-producing In Amenas and In Salah concessions.
BP’s Castrol brand serves consumers in more than 150 countries in various sectors, including automotive, marine and industrial.
Its passenger car engine oils include Edge, Magnatec and GTX.
Its products also include commercial vehicle engine oils, transmission fluids, metalworking and machining fluids, production fluids, and specialist greases and lubricants.
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