Israel-Hezbollah conflict deepens Lebanon's economic crisis

In his small currency exchange shop in Beirut, 86-year-old Farouk Khoury is watching the news on television, showing the escalating conflict between Hezbollah and Israel spreading across Lebanon. No customers ring the bell to exchange money.

"Today, I have money to exchange, tomorrow, I don't know. Maybe tomorrow we close," Kouri tells DW, appearing increasingly uncertain about his business, which has deteriorated significantly with the recent escalation of the conflict between Israel and Hezbollah.

As he watches news footage of explosions and missile strikes on buildings, Kouri points to the logo of his business, showing the year 1975 — the same year the Lebanese civil war began.

The latest escalation between Hezbollah and Israel began less than two weeks ago, initially peaking with explosions of Hezbollah's pagers and walkie-talkies last week, killing over 40 people, most of them Hezbollah fighters but also civilians and children. This week's airstrikes in southern Lebanon, the Beqaa region, and Beirut's southern suburbs have killed more than 500 people, according to Lebanon's health minister.

Several countries have urged their citizens to leave Lebanon, and dozens of international airlines have canceled flights to and from Beirut.

"I am open five days a week. Before the escalation, tourists from France and other countries used to come to exchange currency, but now nobody comes," Kouri says.

Perla Tatros, 19, works in a tiny cafe in Beirut. She also hasn't seen many foreigners coming to the cafe lately. "But it's not just foreigners; even Lebanese people are coming less often to the cafe where I work. This is happening because of the conflict, but also due to other issues that came before, like the economic crisis," she told DW.

Lebanon's economic crisis beyond the war

The struggles facing Kouri and Tatros' businesses are not solely due to the Hezbollah-Israel crisis but are part of the worsening issues Lebanon has experienced over the past five years.

Sami Nader, a Lebanese economist and founder of the Levant Institute for Strategic Affairs in Beirut, says Lebanon in 2024 is vastly different from 2006 during the second Hezbollah-Israel war. Back then, he told DW, funds flowed from the Lebanese diaspora and foreign countries, but today, Lebanon is lacking the resources to rebuild its economy.

He rattles through the multiple shocks Lebanon has been experiencing in recent years. There was, first of all, the 2019 financial collapse, which resulted in the loss of life savings and a 98% devaluation of the Lebanese pound, pushing 80% of the population into poverty. Then the COVID-19 pandemic, which damaged the economy further. And finally, the 2020 Beirut port explosion.

"Politically, Hezbollah dominates without a unity government, deepening sectarian divides, while the Syrian refugee crisis and now internal displacement strain Lebanon's economy, infrastructure, and social fabric, exacerbating despair," he adds.

He says an all-out war between Hezbollah and Israel, with a looming ground invasion by Israel, will spell the definitive end for the Lebanese economy.

For Nijme Nassour, a 24-year-old pharmacist in Beirut, business has also changed significantly since the escalation.

"Customers are stockpiling more medicines than before — five or six boxes, especially for chronic diseases. Luckily, our suppliers still have stock," she told DW. When asked if she would shut down her business if the escalation intensified, Nassour said she would continue operating. "Pharmacies work more during the war — unfortunately."

Joseph Gharib, president of the Syndicate of Pharmaceutical Importers and Warehouse Owners, recently stated that the current stock of medications is sufficient for five months. However, the high number of wounded and killed is "testing the health sector," he said.

How the conflict is crippling the Lebanese economy

Lebanese economist Roy Badaro says before the recent escalation of the conflict between Hezbollah and Israel, a small segment of the population was slowly recovering from the economic crisis. However, with this escalation, conditions could worsen significantly.

"Suburbs in south Beirut, where most Israeli strikes are focused, will pay an extremely high price for the war. Even if people display victory signs with two fingers, it doesn't necessarily reflect their true feelings inside," he told DW

People in southern Lebanon, are even worse off as they no longer have homes, he adds — many apartments have been destroyed, and agricultural land in the south has been ruined. "Confidence in those running the country is below zero. So how could you have an economy with all these factors," he asks.

Agriculture in Lebanon has been severely impacted by the conflict between Israel and Hezbollah, as the fighting has caused soil pollution, displaced farmers, disrupted supply chains, and damaged infrastructure, threatening organic farming.

In April, Prime Minister Najib Mikati reported that 800 hectares (1,976 acres) of land were destroyed, 34,000 livestock were killed, and about 75% of local farmers lost their livelihoods, leading to an agricultural disaster in southern Lebanon.

British broadcaster BBC reported a total of 7,491 cross-border attacks by both sides since the start of the conflict last year, with Israel conducting approximately five times as many attacks as Hezbollah. These attacks have caused significant damage to infrastructure, including water, electricity, telecommunications, and roads, resulting in casualties among maintenance workers and first responders.

In southern Lebanon and Beqaa, nearly 500,000 people have been displaced since Israel intensified its military campaign, according to Lebanese Foreign Minister Abdallah Bouhabib, adding to the around 110,000 who had already been displaced before.

"The increase in displaced people contributes to Lebanese despair and worsens the country's social and economic conditions," says Nader.

Badaro explains that the Lebanese economy comprises different levels of resilience: Some people have outside income or indexed earnings within Lebanon. Then, there are those on fixed salaries or with no income at all — they are suffering greatly now.

Many of the latter are employed in the tourism sector, says Badaro, which has been hugely impacted. 

"The tourism sector is essentially dead. Most clubs and restaurants are nearly closed, with a drop in activity of at least 50%, and possibly as much as 60% to 70%."

Edited by: Uwe Hessler