The potential for a major discovery of offshore hydrocarbon resources in Lebanon raises concerns about its macroeconomic implications, specifically the Dutch disease phenomenon. This paper first explores whether the Lebanese economy has already been experiencing a Dutch disease episode since the early 1990s due to massive sustained capital inflows fueled by regional petro-dollar income. Using macroeconomic annual data, we find that capital inflows have been accompanied by two Dutch disease symptoms: Real exchange rate appreciation and shrinkage of the manufacturing and agriculture sectors. The paper then explores the likely effects of a resource boom on the economy. The paper concludes by recommending economic policy measures that could be implemented in conjunction with the development of offshore hydrocarbon resources.

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