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No end in sight for Lebanon’s economic woes

12 June 2023

This package on Lebanon also includes:

> Political deadlock in Lebanon blocks reforms
> Lebanon moves to secure $150m solar financing
> Dar al-Handasah acquires Turkish consultant
> Eni and Total complete Lebanon gas deal

 

Experts remain pessimistic about the outlook for Lebanon’s economy as the crisis continues to worsen more than three years after it began in 2019.

The country only has a caretaker government and no president – and it is hard to see how it will implement the reforms the IMF says are needed.

On 8 June, IMF spokesperson Julie Kozack said: “Lebanon needs urgent action to implement a comprehensive economic reform programme to arrest the severe and deepening crisis and to allow Lebanon’s economy to recover.”

She added that the IMF was concerned that delays in implementing key reforms were keeping the economy severely depressed.

“We are concerned about irreversible consequences for the economy, especially for the poor citizens of Lebanon and the middle class,” she said.

Lebanon’s currency has weakened dramatically since the start of the country’s economic crisis, plunging much of the population into poverty.

In March, the Lebanese pound, officially pegged at 15,000 to the dollar, was trading at 100,000 against the dollar on the country’s parallel market, down from 1,507 before the economic crisis hit in 2019.

In May, a World Bank report stated: “The systemic failure of Lebanon’s banking system and the collapse of the currency have resulted in a large, dollarised cash-based economy.

“It not only threatens to compromise the effectiveness of fiscal and monetary policy, but also heightens the risk of money laundering, increases informality and prompts further tax evasion.”

In April 2020, the Lebanese government agreed with IMF staff to implement a series of reforms to end the crisis, but very few have been executed.

This is mainly due to the country’s ongoing political deadlock.

Lebanon has had no head of state since President Michel Aoun’s term ended at the end of October 2022, worsening the country’s political paralysis at a time when important policy decisions are needed to get the economy back on track.

According to the IMF, the economic outlook for Lebanon is highly uncertain and depends on policy actions taken by the authorities to carry out the agreed reforms.

Kozack said: “Timely implementation of these reforms is critical to end the current crisis and prevent a further deterioration in living standards of the people of Lebanon.”

She added: “Lebanon will need strong financial support from the broader international community and the financial needs of Lebanon over the next several years are very large given the magnitude of the economic crisis.”

Bailout prospects

While the IMF has said that Lebanon will need significant financial support from other countries to help it get through its economic crisis, it is unclear where that support will come from.

Nicholas Blanford, a non-resident senior fellow with the Atlantic Council’s Middle East programmes, says it is unlikely that Saudi Arabia will be willing to bail the country out financially as it has done in the past.

He said: “Saudi Arabia has pumped billions of dollars into Lebanon over the years, including helping with the reconstruction programme in the 1990s after the civil war. Saudi has also helped Lebanon financially through various economic slumps.”

The change of leadership in Saudi Arabia when King Salman came to the throne in 2015 led to a change in policy regarding financial bailouts for Lebanon, according to Blanford.

“It seems like Saudi feels that it got very little in return for its past investment in Lebanon due to the fact that Hezbollah remains a dominant force in the country politically and militarily.

“The Americans and the French have, for several years, been pressing the Saudis to show more interest in Lebanon as a pushback against Iranian influence, but, so far, they haven’t shown much interest.”

The Lebanese are keeping their fingers crossed that economically viable quantities of oil and gas are found, but there is also a huge amount of scepticism given the state of the political system here and the nature of the politicians
Nicholas Blanford, Atlantic Council’s Middle East programmes

In October last year, Lebanon and Israel agreed a deal to end a long-running maritime border dispute in the Mediterranean Sea, clearing the way for increased oil and gas exploration activity in Lebanese waters.

Following the deal, in May this year, it was announced that a consortium led by France’s TotalEnergies would start drilling for oil and gas off the country's coast at the beginning of September.

While it is possible that new hydrocarbon discoveries in Lebanese waters could help ease the country’s economic problems over the long term, it is doubtful that this would provide any benefit in the short term, according to Blanford.

“The Lebanese are keeping their fingers crossed that economically viable quantities of oil and gas are found, but there is also a huge amount of scepticism given the state of the political system here and the nature of the politicians themselves.”

Blanford believes that many Lebanese citizens are worried that if commercially viable quantities of hydrocarbons are found, they are ultimately only likely to benefit the country’s oligarchs rather than the general public.

Due to the wide range of severe political and economic problems that Lebanon faces, there is unlikely to be any improvement over the coming months unless common ground is found between the country’s rival political blocs.

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Wil Crisp

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    Emirates and Etihad Airways both moved to address the insurance gap directly ahead of the FCDO change. On 17 June, Emirates launched a comprehensive travel cover product developed in partnership with insurance provider Travel Guard, offering medical cover for conflict-related incidents, trip cancellation cover, compensation for baggage delay or loss, and unlimited medical expense and emergency evacuation cover worldwide. The product is available across 27 markets.

    Emirates also committed to rebooking disrupted customers at no additional cost where flights have been cancelled due to conflict-related disruption, including itineraries connecting on other carriers.

    Arrivals data

    Data from UK-based analytics firm GlobalData illustrates both the scale of the expected contraction and the strength of the projected recovery. UAE international arrivals, which reached approximately 30 million in 2025, are forecast to fall to about 26.4 million in 2026 – a decline of roughly 12% – before rebounding sharply to 32.1 million in 2027. 

    GlobalData’s projections then show continued growth to about 33.5 million in 2028, 35.1 million in 2029 and 36.6 million by 2030. 

    On that trajectory, arrivals would exceed pre-conflict levels within a single year of recovery and surpass 2025 figures by more than 7% in 2027 alone.

    The GlobalData numbers place the 2026 contraction in a longer historical context. UAE arrivals grew almost uninterrupted from 8.4 million in 2009 to 25.6 million in 2019, before collapsing to 8.4 million in 2020 at the height of the Covid-19 pandemic. The subsequent recovery was among the fastest recorded for any major destination: arrivals reached 22 million in 2022, crossed 26.3 million in 2023 and climbed to 28.7 million in 2024 before the 2025 peak. 

    That precedent – a two-thirds collapse followed by full recovery within three years – underpins the confidence embedded in GlobalData’s post-conflict forecast, which projects a return to growth momentum by 2027 and a trajectory that would deliver 36.6 million arrivals by 2030.

    The near-term contraction nevertheless remains substantial. A decline from approximately 30 million to 26.4 million in a single year represents the sharpest drop in UAE arrivals outside the pandemic, and it comes at a point when the sector had been tracking well ahead of pre-pandemic levels.

    Past experience

    Historical precedent from comparable disruptions points to a consistent pattern: recovery shape is determined less by the severity of the initial decline than by the duration of the disrupting event and the speed at which the perception of the source market resets.

    Single-event incidents with clear endpoints and no sustained security overhang have historically produced the fastest recoveries, with arrivals returning to trend within 12 months. Sustained conflicts or events that trigger prolonged travel advisory regimes produce more extended recovery arcs, with source market confidence rather than operational conditions defining the timeline. 

    The Egypt Metrojet bombing in 2015 remains the most instructive cautionary example for the Gulf: Russian airspace restrictions imposed after the incident kept a major source market out of the Egyptian market for more than five years, with arrivals recovery lagging the resolution of the underlying security concern by a significant margin.

    The UAE’s own Covid recovery offers a relevant local reference point. The GlobalData numbers show arrivals collapsed from 25.6 million in 2019 to 8.4 million in 2020, before recovering to 21.9 million in 2022 and surpassing pre-pandemic levels by 2023. The post-conflict recovery forecast of a bounce back to above 2025 levels by 2027 is less aggressive than the post-Covid rebound, reflecting both the more moderate scale of the 2026 contraction and the more complex advisory and perception dynamics involved in a conflict resolution scenario.

    The DET’s response is structured around three priorities: operational continuity, sector support and market confidence. The government announced a AED2.5bn ($612.7m) support package targeting the tourism, hospitality and entertainment sectors, structured to protect business continuity, preserve employment and maintain visitor experience standards. Dubai is doing all it can, but much depends on how quickly perceptions shift.

    Pilgrimages drive Saudi tourism

    More than 1.7 million pilgrims performed Hajj in 2026, according to official data published by Saudi Arabia’s General Authority for Statistics, underscoring the continued centrality of religious tourism to the kingdom’s visitor economy.

    The total of 1,707,301 pilgrims comprised 1,546,655 from outside the kingdom and 160,646 internal pilgrims, which includes Saudi citizens and residents. 

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    Hajj is a structural pillar of Saudi religious tourism, which alongside Umrah, draws tens of millions of visitors to Mecca and Medina each year. The sector sits at the core of Vision 2030’s tourism diversification strategy, which targets 150 million visits a year by the end of the decade. 

    Continued investment in transport infrastructure, including the expanded King Abdulaziz International airport and Haramain high-speed railway capacity, will help Riyadh achieve this target.

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    Colin Foreman