Lebanon Business Overview

Main Sources of Business in Lebanon

Located in the Levant on the easternmost part of the Mediterranean Sea, the Republic of Lebanon is neighboured with Palestine from the south, and Syria to the north and east. Lebanon is a parliamentary democratic republic that is divided into six governorates with Beirut as its capital.

With a currency of Lebanese Pound (LBP), the Lebanese economy is service-oriented, where its main growth sectors include banking and tourism. The government continues to favour a strong role for the private sector (including family businesses) in a liberal policy environment. Since the last quarter of 2019, severe events have set off an interconnected fiscal, monetary and economic crisis as well as deep recession that have reached unprecedented levels.

Banks have imposed unofficial capital controls, restricted transfers of foreign currencies outside Lebanon and significantly reduced credit lines to companies and withdrawal of cash to private depositors, all of which added to the disruption the country’s economic activity. The difficulty in accessing foreign currencies led to the emergence of a parallel market to the official peg whereby the price to access foreign currencies has been increasing constantly, deviating significantly from new the official peg of 15,000 USD/LBP. The official exchange rate has increased from 1,507.5 USD/LBP to 15,000 USD/LBP starting 1 February 2023 the Lebanese Parliament finalised the 2022 Public Budget Law, whereby it introduced several amendments related to taxes, incentives and exemptions applicable in Lebanon.

Hezbollah’s Influence

Since Israels response to Hamas’s October 7^th attack, Hezbollah’s operational capabilities have been emasculated, this coupled with the serious degradation of Hamas and the fall of the Assad regime in Syria, have defanged Iran’s ‘axis of resistance’. As such Hezbollah’s influence in Lebanon has diminished.

On January 9, 2025, the Lebanese Parliament elected army commander Joseph Aoun as President.

Lebanon’s caretaker presidency began in October 2022 after Michel Aoun left office, and the Parliament couldn’t agree on a successor.

The vote follows a 14-month conflict between Hezbollah, a proscribed terrorist organization by the UK, and Israel. Hezbollah has significant political and military power in Lebanon since the 1980s. Analysts say Joseph Aoun’s election could empower the Lebanese state over Hezbollah and address economic challenges.

Who is Joseph Aoun?

Joseph Aoun, a Maronite Christian, served in the Lebanese Armed Forces since 1983 and became its commander in 2017. After two rounds of voting, he won 99 out of 128 votes in the second round and was elected president for six years.

Observers believe Saudi Arabia, France, and the United States supported Aoun’s candidacy.

His election followed Suleiman Frangieh, initially backed by Hezbollah, withdrawing in January. Frangieh and Hezbollah had supported Aoun in the second round of Parliamentary voting.

The Washington Institute’s analysis suggests that beyond electing a new president, additional measures, such as providing new economic and military assistance and possibly imposing sanctions on certain Lebanese politicians, will be necessary.

The UK has already taken action by imposing sanctions against the former Central Bank Governor of Lebanon for diverting funds for personal gain.

What might the election mean for Hezbollah?

Hezbollah, backed by Iran, is a formidable non-state armed group in the Middle East.

After a 14-month conflict with Israel in 2023, Hezbollah’s military weakened. Israel killed its leader, Hassan Nasrallah, in 2024, and is estimated to have killed 2,500 to 4,000 Hezbollah operatives.

Bashar al-Assad’s departure from Syria in December 2024 weakened Hezbollah and Iran. Syria significantly influenced Lebanon under Assad and his father, with a military presence from 1976 to 2005. Hezbollah supported Assad in the Syrian civil war.

In December, Hezbollah shifted its focus to Lebanon. It will maintain influence as a representative of Lebanon’s Shia groups, with representatives and allied parties in the March 8 political coalition. Hezbollah supported both Michel and Joseph Aoun as Presidents and has held ministerial office. There are fears however that Aoun won’t provoke Hezbollah, which remains domestically powerful.

What is the outlook for Lebanon’s economy?

Lebanon’s severe economic crisis since 2019, marked by a 38% GDP drop between 2019 and 2024 and a 221% peak annual inflation rate in 2023, is estimated to have caused US$8.5 billion in damage from the 2023/24 conflict with Israel.

Hosting 1.5 million Syrian refugees, mostly in poverty, and displacing 1.3 million people in the same conflict, Lebanon faces significant humanitarian challenges.

An IMF financing program agreement was reached in 2022, and the IMF is now ready to support Lebanon. However, the World Bank argues that Lebanon’s economic challenges are orchestrated by the political elite.

Lebanon and Israel lack formal diplomatic relations but have a disputed land border. A maritime boundary agreement was reached in 2022. On November 27, 2024, Israel and Hezbollah agreed to a ceasefire. They had 60 days to withdraw from border areas and for the Lebanese Armed Forces (LAF) and UN Interim Force in Lebanon to control southern Lebanon. Israel threatened to act against Hezbollah if it sought weapons or attacked Israel.

In January 2025, Hezbollah warned its patience with Israel was running out and Joseph Aoun, Lebanon’s President, said his presidency would develop a strategy to remove the Israeli occupation and deter aggression. Israeli Foreign Minister Gideon Sa’ar hoped President Aoun would contribute to stability within the country.

References

https://crsreports.congress.gov/product/pdf/IF/IF10703

https://www.chathamhouse.org/2021/06/how-hezbollah-holds-sway-over-lebanese-state/02-influence-through-state-institutions

https://researchbriefings.files.parliament.uk/documents/CBP-9729/CBP-9729.pdf

https://www.worldbank.org/en/country/lebanon/overview

https://commonslibrary.parliament.uk/a-new-president-for-lebanon-what-next-in-2025/