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Abu Dhabi, UAEThursday 21 June 2018

Lebanon business conditions deteriorate at slower pace in January, survey shows

PMI rate of decline was the slowest for nine months for the private sector

January’s survey revealed a rise in prices, linked largely to the implementation of a higher VAT rate at the beginning of the year, the bank said. Jekaterina Saveljeva / Reuters
January’s survey revealed a rise in prices, linked largely to the implementation of a higher VAT rate at the beginning of the year, the bank said. Jekaterina Saveljeva / Reuters

Lebanon’s private sector business conditions continued to deteriorate in January, but at the slowest pace for nine months, according to a key gauge of the economy.

The Blom Lebanon PMI rose to 47.1 in January, up from 46.1 in December, the highest month-on-month increase in over a year. A reading above 50 indicates expansion, while a reading below 50 indicates contraction. The survey is sponsored by Blominvest Bank and compiled by IHS Markit.

“Higher costs and output prices characterized the first month of 2018 as the amended tax law went into effect in January,” said Marwan Mikhael, head of research at Blominvest Bank. “Although tourism did improve during December, its impact on the economy was limited as output and new orders for companies continued their decline in January but at a slower rate. As it appears from the survey, companies remained pessimistic regarding their activity in the coming months.”

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Lebanon’s economy is suffering from an economic slowdown compounded by a high debt to GDP ratio of about 150 per cent and the spill over of a seven-year war in neighbouring Syria.

Last year the government introduced a slew of new taxes as part of measures of shoring up government revenue and to finance public sector salary increases.

These measure have started to affect business conditions, according to the survey.

“January’s survey meanwhile revealed a rise in prices, linked largely to the implementation of a higher VAT rate at the beginning of the year,” the bank said. “The greater tax burden coupled with higher fees drove an increase in firms’ costs, which was in turn reflected in a rise in average prices charged for goods and services."

The rate of inflation in selling prices was the highest since mid-2014, while the increase in costs was the steepest since mid-2013, it added.