Lebanese economy projected to contract by at least 7% due to war, finance minister says

* Finance Minister Yassine Jaber warns of up to $20 billion in war-related damage * Remittances at risk and international aid down, deepening Lebanon's economic ​crisis

* Currency stability maintained, but state revenues severely strained By Nazih Osseiran and Laila Bassam

BEIRUT, ​May 21 - The ongoing war between Israel and Lebanese armed ‌group ​Hezbollah is expected to shrink Lebanon's economy by at least 7% this year and could cost the country an estimated $20 billion, Finance Minister Yassine Jaber told Reuters. The current conflict, which erupted on March 2 when Hezbollah fired at Israel in support of Iran, has dealt ‌a new blow to Lebanon, already suffering from a 2019 financial meltdown and a 2024 war between Hezbollah and Israel.

In an interview on Wednesday, Jaber said he expected the current war to prompt an economic contraction of between 7% and 10% in 2026, and that direct and indirect damage to Lebanon could total as much as $20 billion. The 2024 war cost Lebanon at least $8.5 billion ‌in physical damage and economic losses, according to the World Bank. Lebanon's real GDP contracted by 7.1% in 2024, the World Bank said, leading to a cumulative GDP decline ‌of nearly 40% since 2019. In January, the World Bank had projected a modest recovery of 4% GDP growth in 2026 if the country remained stable, brought in some reconstruction aid and kept up efforts to introduce financial reforms.

Jaber said the government had been hoping for a budget surplus this year, but instead had allocated $50 million in public funds to support more than 1 million people displaced by the war. RISKS TO GULF REMITTANCES

Hostilities between Iran-backed Hezbollah and ⁠Israel have persisted ​despite a ceasefire announced on April 16, with ⁠both sides accusing each other of truce violations. Israel has kept up strikes on southern and eastern Lebanon, and its troops are razing homes in a southern border strip of Lebanon, citing security concerns. Hezbollah has continued targeting northern ⁠Israel and Israeli military positions within Lebanon.

More than 3,000 people have been killed in Lebanon since March 2, according to Lebanese authorities. Jaber said the full extent of the war's economic damage to Lebanon would be ​determined by remittance inflows from the Gulf, the success of this summer's tourist season and whether Israeli strikes would continue to destroy properties and livelihoods in Lebanon.

Remittances are ⁠a cornerstone of Lebanon's economy, with hundreds of thousands of Lebanese in Gulf capitals sending money back home or returning for the holidays to spend their earnings. But as Gulf economies come under pressure from the Iran war, Jaber ⁠is ​worried that Lebanon's expats will be unable to sustain this role.

"This time, the regions where the Lebanese work are themselves affected," he said. LOANS, NO GRANTS

International aid has also fallen well short of what Lebanon received during the 2024 war, when it secured $700 million in humanitarian support and dozens of planeloads of aid, Jaber said. Despite a visit by UN Secretary-General António ⁠Guterres and an appeal for $300 million, only around $100 million has materialised, he said. A loan of $200 million from the World Bank and a €45 million grant from the European Union have provided some ⁠relief.

"We are depending on loans today," Jaber ⁠said. "We are not getting a lot of grants." State revenues are also down, he said, but the government has been able to maintain the value of the Lebanese pound against the dollar, a rare bright spot in an otherwise bleak economic outlook.

"We are tired, our ability to ‌withstand is being tested time and ‌time again and I think the Lebanese are tired of this," Jaber said.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)