Economic impact of potential war in Lebanon: Private Sector's concerns

Private sector institutions have begun developing emergency plans to address the challenges of a potential war that could affect Lebanon.

This article was originally published in and translated from Lebanese newspaper Nidaa Al-Watan.

Concerned sources have emphasized that these plans involve relocating headquarters and warehouses, with the option of remote work in specific sectors.

However, there is significant apprehension about the potential disruption of many employees' salaries, as the current situation differs significantly from the 2006 war.

Back then, banks were operating relatively normally, and deposits could be withdrawn, while the Central Bank of Lebanon could provide liquidity to banks when needed.

But today, private sector deposits are held in banks, and many private institutions manage their finances monthly, including employee salaries according to the sources. 

Furthermore, economic organizations sources have indicated that war conditions will force some institutions to close and suspend employee salary payments as long as they have no deposits and no sustainable cash flow.

These sources also estimated that around 100,000 employees may be affected to varying degrees depending on the size of the institutions they work for, the regions, sectors, and the extent of their vulnerability to the war's impact.

The first concerns are arising from the tourism sector, which relies on attracting foreign currency to the country.

The President of the Lebanese Hotel Association, the Federation for Tourism Industries in Lebanon, Pierre Achkar, revealed significant losses that the Lebanese tourism sector is expected to incur due to the ongoing conflict in Gaza and the developments in southern Lebanon.

He anticipated that tourism establishments would lose the profits they had earned during the summer season in the fall.

Moreover, he disclosed that "European groups planning to visit Lebanon during October and November have naturally canceled their reservations following their countries' travel warnings about going to Lebanon."

A source in the tourism sector predicted that hotel establishments may close immediately upon the outbreak of the war in Lebanon, and this will have a domino effect on institutions in other sectors.

On the macroeconomic level, studies indicated that the losses, according to initial estimates, will surpass both the direct and indirect losses of the 2006 war, which amounted to approximately $10 billion. 

If we consider inflation and the rise in global and local prices, the expected losses in the event of a war are projected to range between $17 and $19 billion.

This would push Lebanon's GDP back to the levels it had in 1989-1990 when the country emerged from a destructive 15-year civil war, losing 60% of its value during the ongoing crisis that has persisted for the past four years.