Lebanon May Return to Stagflation in 2026

Bank Audi says Lebanon's economy could fall back into stagflation in 2026 if the war does not end, according to its latest quarterly economic report. Economists at the bank put a price tag on the conflict, estimating that Lebanon is losing roughly $75 million for every day the fighting continues. That figure covers the combined drag on output, trade, tourism, and investment. Three Paths for GDP Bank Audi mapped out three scenarios for full-year growth, each tied to how long the war lasts. If a ceasefire holds through 2026, GDP is projected to stagnate at zero growth. Should the war drag into June before stopping, the report puts the contraction at 5%. A scenario where the war runs through the entire year would see the economy shrink by 11%. Stagflation, meaning the mix of stalled growth and rising prices, would mark a return to conditions Lebanon spent the past two years trying to climb out of. The $75 Million Daily Cost Lebanon's economy has been operating under heavy strain since cross-border hostilities escalated. Sectors that depend on movement and confidence, including hospitality, agriculture in the south, and remittances tied to investor sentiment, take the hardest hit. That daily loss figure factors in both direct damage and the indirect cost of paused activity. Bank Audi's analysts treat the war's duration, not just its intensity, as the variable that determines whether Lebanon recovers or slides backward. Reform Targets at Risk An 11% contraction would erase much of the modest stabilization Lebanon recorded after the financial crisis that began in 2019. Even the middle scenario, a 5% drop, would push the country further away from its IMF reform targets and complicate negotiations with bilateral lenders. Every additional month of conflict translates directly into lost GDP, weaker fiscal revenues, and a heavier reconstruction bill once the fighting stops.