The escalation of hostilities in September 2024 added another layer of complexity to the already profound economic and financial crisis that Lebanon has been struggling with for the past five years. As a result, the economy is expected to contract by 9.2 percent, assuming the hostilities continue until the end of the year. 

Even if the hostilities were to cease by the end of 2024, the economy is likely to further contract by an additional 2.3 percent in 2025 and 2.4 percent in 2026. The medium term negative economic outlook is attributed to an expected sharp slowdown in economic activity, the anticipated slow pick-up of recovery and reconstruction efforts due to due to institutional weakness, in addition to significant losses in capital across all sectors, including infrastructure, buildings, factories, equipment, and utilities. 

The conflict presents profound short-term economic implications, including significant contraction in key sectors, such as tourism, agriculture, manufacturing, trade, and other services. The disruption of trade routes and supply chains, direct shelling, and reduced consumer demand has forced a significant mass of business activities, particularly micro, small, and medium-sized businesses, to close or suspend operations. The unemployment rate may increase to a staggering 32.6 percent by the end of the year.

The recent developments, along with the structural challenges facing Lebanon, will increase poverty and vulnerability rates. Thus, it is imperative for the international community to mobilize immediate humanitarian relief support. It is equally important and urgent to mobilize development assistance to support economic, social, and institutional stability.