Lebanon exhibits structural weaknesses and is highly vulnerable to the unstable regional environment
The Lebanese economy is highly dollarized and essentially service-oriented (services account for over 80% of GDP, compared with around 15% for industry and 4% for agriculture). It is exposed to regional and global fluctuations. Tourism, real estate, and construction are the main supply-side drivers of growth, which have taken a toll since the beginning of the Syrian conflict in 2011. The conflict has continuously spilled over to the economy as Lebanon today hosts the highest number of refugees per capita in the world (more than a quarter of the population). It has significantly increased labor supply (+50% between 2011 and 2014 according to the IMF) and strained Lebanese public services.
Yet, Lebanon enjoys financial stability due to important flows of remittances from the large diaspora (USD7.2bn in 2015, 14% of GDP, and USD6.6bn in 2016). Even though those flows strengthen the deposits of private banks that hold assets worth over 350% of GDP, the banking sector presents vulnerabilities. In fact, the non-performing loans to total loans ratio stands at 10.4% according to the IMF and has more than doubled in three years.