Amidst escalating conflicts in Gaza after October 7th, security tensions have surged along the Lebanese-Israeli border. This has raised critical concerns about national security, potentially impacting Lebanon’s economy.
LIMS explained that the economic landscape is marred by heightened uncertainties. During the summer, a surge of dollars flowed into the nation’s coffers. However, recent incidents have precipitated the exodus of remaining tourists and expatriates. This departure raises concerns about their willingness to choose Lebanon as a destination for the upcoming Christmas and New Year holidays. Lebanon’s national output, heavily reliant on tourism, stands at the precipice of a substantial downturn.

Faced with the prospect of a wider conflict, citizens tend to stockpile essential goods and currencies, particularly foreign reserves such as the US dollar. This surge in hoarding increases selling Lebanese pound and buying dollars. Simultaneously, the specter of war creates an inhospitable environment for investments. Corporations postpone expansion plans and capital expenditures. Investors, too, adopt a defensive stance, diverting funds away from Lebanon.

The result is a noticeable deceleration in economic activity, accompanied by a rise in capital outflows and a concurrent reduction in inflows. This scenario sets the stage for a potential imbalance in the external sector, exerting increased pressure on the exchange rate of the Lebanese pound and on foreign exchange reserves.

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