The cost of physical damages and economic losses due to the conflict in Lebanon is estimated at $8.5 billion, according to a new World Bank report that provides an initial assessment of the impact of conflict on Lebanon’s economy and key sectors. The Lebanon Interim Damage and Loss Assessment (DaLA) finds that damages to physical structures alone amount to $3.4 billion and that economic losses have reached $5.1 billion.
Conflict cuts Lebanon’s real GDP growth by at least 6.6 percent
In terms of economic growth, the conflict has cut Lebanon’s real GDP growth by at least 6.6 percent in 2024 so far. This compounds five years of sharp economic contraction that has exceeded 34 percent of real GDP. There are over 875,000 internally displaced persons in Lebanon. Women, children, the elderly, persons with disabilities, and refugees are at the highest risk. Around 166,000 individuals have lost their jobs, corresponding to a loss of $168 million in earnings.
The World Bank assessed the conflict’s impact on the Lebanese economy by examining shocks to consumption and net exports as these serve as the primary transmission channels for the conflict’s effects to date. With these impacts, the World Bank expects real GDP to contract by at least 5.7 percent in 2024, compared to a counterfactual scenario without conflict in which real GDP growth would have reached 0.9 percent.
Shock to Lebanon’s already struggling economy
These impacts of the conflict represent yet another shock to Lebanon’s already struggling economy, which has undergone an unprecedented economic crisis that began in 2019 and has seen a contraction of over 34 percent in real GDP since then, equivalent to 15 years of GDP growth. The conflict compounds the effects of the ongoing economic downturn and further undermines Lebanon’s prospects for recovery, which are already struggling due to sovereign default, a systemic banking crisis, limited capital investment, and significantly curtailed public services.
Tourism halt impacts economic conditions
Widespread displacement and destruction have triggered a substantial decline in private consumption, which accounted for 134 percent of GDP in 2023, significantly slowing economic activity. In addition, tourism, a key economic pillar, took a major hit, with the 2024 escalation likely halting this sector for the year, leading to major losses in service exports. Tourism and hospitality account for $18 million of damage, but have losses estimated at $1.1 billion, driven by reductions in tourist arrivals and inbound travel, affecting revenues of hotels, restaurants, and other businesses reliant on tourist spending.
Housing sector sees largest losses
In addition, Lebanon’s housing sector witnessed the most damage, with almost 100,000 housing units partially or fully damaged, amounting to $3.2 billion in damages and losses.
Meanwhile, disruptions to commerce are amounting to around $2 billion due, in part, to the displacement of employees and business owners. The destruction of crops and livestock, in addition to the displacement of farmers, has also driven agricultural losses and damages of about $1.2 billion.
In the education sector, losses have reached around $215 million based on lost private school tuition payments and the costs of temporary schooling. Environment, through natural resource degradation and the impact on solid waste management, has incurred $221 million in damage with losses estimated at $214 million. The health sector has also suffered damage valued at $74 million, with losses estimated at $338 million.
