Escalating Conflict in Lebanon Threatens Economic Collapse: UNDP Warns of Severe GDP Decline and Rising Unemployment

UNDP Report: Lebanon Faces a 9.2% Economic Contraction by Year-End, with Dire Impacts on Lives, Livelihoods, and Public Services.

Escalating hostilities in Lebanon are exacting a severe toll on the country’s economy, society, and infrastructure. According to a new rapid appraisal by the United Nations Development Programme (UNDP), Lebanon’s Gross Domestic Product (GDP) could shrink by as much as 9.2 per cent if the current conflict continues through the end of 2024. This potential contraction would be a devastating blow, erasing the modest gains in economic stability achieved earlier this year, and adding to the 28 per cent economic contraction recorded between 2018 and 2022.

The appraisal, titled Economic and Social Consequences of the Escalating Hostilities in Lebanon, also highlights the possibility of further economic deterioration beyond 2024. Even if the conflict were to cease by year-end, Lebanon’s economy could contract by another 2.3 percent in 2025 and 2.4 percent in 2026. Major factors contributing to this continued downturn include the slow recovery of economic activity, delayed reconstruction efforts, and widespread capital losses in sectors like infrastructure, manufacturing, and utilities.

The ongoing conflict is causing profound disruptions across Lebanon’s economy. In addition to the destruction of infrastructure and businesses, public revenues are expected to decline by 3.2 per cent in 2025 and another 3.1 per cent in 2026. This will further strain the government's ability to maintain essential public services, including healthcare, education, and utilities. These fiscal challenges are likely to exacerbate Lebanon’s already fragile socio-economic situation, heightening poverty levels and increasing the likelihood of civil unrest.

“Not only are the people of Lebanon facing the immediate threat to life, they are also confronting rising poverty, mounting social instability, and the risk of civil unrest,” said UNDP Administrator Achim Steiner. “The impacts of the conflict on Lebanon’s economy and its long-term development prospects are extremely serious. What is most needed now is a ceasefire. Lebanon also urgently requires committed support from the international community, both in the form of humanitarian aid and more comprehensive assistance to stabilize its social, economic, and institutional foundations.”

Wider Regional Involvement and Advanced Military Technologies Exacerbate the Crisis

The report underscores that the current conflict differs from previous episodes of violence in Lebanon, particularly due to the heightened risk of broader regional involvement and the use of advanced military technologies. The humanitarian and economic impacts are expected to be significantly more severe than during the 2006 war, which saw an 8 to 10 percent drop in GDP (equivalent to a loss of US$2.5 billion to US$3.6 billion). The geopolitical complexities of 2024, coupled with the use of more sophisticated weaponry, are likely to deepen the country’s economic and social crisis for years to come.

Lebanon’s Human Development Index (HDI), which had already been negatively impacted by the financial and economic crisis since 2019, is expected to suffer further. The report warns that the consequences of the ongoing hostilities will leave lasting scars on Lebanon’s development trajectory, affecting both the present and future generations.

Humanitarian Response and Social Stability at Risk

“We are working closely with the Lebanese government to ensure the continued provision of essential services, but the situation is becoming increasingly dire for the people of Lebanon,” said Blerta Aliko, UNDP Resident Representative in Lebanon. “Our focus is on supporting displaced populations and the local communities hosting them. These efforts are critical to maintaining social stability and preventing further escalation of the conflict, which remains our top priority.”

The UNDP report emphasizes that the conflict is having an immediate and devastating impact on Lebanon’s key economic sectors. Tourism, agriculture, manufacturing, and trade have been particularly hard hit, with disruptions in trade routes, supply chains, and consumer demand leading to widespread business closures. Small and medium-sized enterprises (SMEs), which form the backbone of Lebanon’s economy, have been forced to shut down or suspend operations, resulting in skyrocketing unemployment.

UNDP estimates that unemployment will affect approximately 1.2 million workers across Lebanon, with the national unemployment rate expected to surge to a staggering 32.6 percent by the end of the year. The collapse of business activity is depriving millions of Lebanese citizens of their livelihoods, further exacerbating the economic and social crisis.

Immediate International Assistance Needed

The report concludes with an urgent call for international support. In addition to immediate humanitarian aid for those displaced or directly impacted by the conflict, Lebanon will require long-term, multi-dimensional assistance to rebuild its economy and preserve social stability. The international community’s response will be crucial in helping Lebanon avoid an even deeper crisis that could destabilize the entire region.

The combination of escalating conflict, a shrinking economy, and rising unemployment represents a dire situation for Lebanon. Without a ceasefire and international support, the country faces the risk of prolonged economic decline, social unrest, and an uncertain future.