IMF Expects Lebanon’s Economy to Contract in 2026

The International Monetary Fund (IMF) expects Lebanon’s gross domestic product to shrink in 2026 as the country faces severe economic, social, and humanitarian pressures caused by the resumption of conflict.

International Monetary Fund spokesperson Julie Kozack said on Thursday that the fund remains in close contact with Lebanese authorities to discuss measures aimed at managing the economic crisis and reducing the impact of the ongoing war.

Kozack said the IMF is also continuing discussions with Lebanese officials on broader economic reforms that could eventually be supported through an IMF-backed program.

Lebanon is currently negotiating with the IMF to secure emergency financing estimated between $800 million and $1 billion, as the country faces a sharp economic downturn.

A comprehensive agreement remains pending, with the IMF awaiting the implementation of a package of financial and structural reforms by Lebanese authorities.

The two sides are discussing rapid funding options aimed at supporting the government budget, addressing urgent humanitarian and economic needs, and limiting the impact of the ongoing conflict.

Lebanon’s inflation rate slowed in May 2026, suggesting a relative easing in price pressures compared with the previous month, although inflation remains elevated and continues to reflect the country’s economic challenges.

Annual inflation reached 19.0% in May, down from 20.0% in April.

On a monthly basis, prices increased by 0.5%, compared with a 3.0% rise in the previous month, indicating a noticeable slowdown in the pace of cost increases.

The economic crisis has been intensified by widespread damage from the recent conflict between Hezbollah and Israel.

A report by the United Nations Development Programme and Lebanon’s National Council for Scientific Research estimated direct damage to buildings in southern Lebanon at around $1.38 billion.

The assessment found that around 11,095 buildings were completely destroyed, 17,891 housing units were affected, 2,242 buildings suffered partial damage, and 9,311 buildings sustained minor damage.

The IMF said its current efforts focus on managing the immediate economic consequences of the conflict while continuing to support reforms that could prepare Lebanon for future international financial assistance.