Abu Dhabi, UAEFriday 22 November 2019

Lebanon's private sector registers slowest 3-year decline in business conditions

The slower deterioration in operating conditions was partly driven by a softer fall in output at Lebanese private sector firms in October

Lebanese protesters demand the president make parliamentary consultations immediately to facilitate the formation of a new government that replaces the recently resigned cabinet. They also demand the formation of a technocratic government with no political affiliation. EPA
Lebanese protesters demand the president make parliamentary consultations immediately to facilitate the formation of a new government that replaces the recently resigned cabinet. They also demand the formation of a technocratic government with no political affiliation. EPA

Lebanon recorded its slowest decline in business activity in three years, although its economy continues to shrink and may feel the brunt of social unrest that has gripped the country for the past three weeks in forthcoming months, according to the latest data released by IHS Markit and Blom Bank, the country's largest bank by market capitalisation.

The Blom Lebanon Purchasing Managers index recorded a headline rate of 48.3 in October, up from 46.3 in September, however the results could be different as data collection during the survey, ended earlier than planned on or before October 17, due to the closure of business amid nationwide protests in the country. A reading above 50 indicates an increase in economic activity, whereas a rate below 50 indicates contraction.

Lebanon’s economy has been shrinking since mid-2013 and the country has been rocked by the largest protests since the 2005 assassination of former prime minister Rafik Hariri which forced Syria to withdraw its troops after a 29-year presence there.

The survey showed a decline in output was the slowest since January 2016 with a softer contraction in October's total new orders domestically, while new export orders fell at the same pace as September.

The country's economy has grown between 0 and 0.5 per cent since the beginning of the year, said Blominvest Bank general manager Fadi Osseiran.

"The operations of private sector companies since the protests are paralysed," Mr Osseiran said. "Therefore, the materialisation of economic cost of the business impasse is expected in November’s PMI, noting that every day of closure will have an additional cost on the economy.”

Lebanon’s economy is projected to slow to 0.2 per cent this year, from about 0.3 per cent in 2018, according to International Monetary Fund estimates made before the resignation of prime minister Saad Hariri last month. Mr Hariri stepped down over disagreements with members of his national unity government on reforms demanded by protesters who blame Lebanon’s political elite for widespread corruption and nepotism, that they say contributed to the country accruing $86bn of public debt equivalent to 150 per cent of gross domestic product.

Lebanon registered an outflow of capital estimated at about $3 billion in the first nine months of the year, due to its deteriorating economic climate and heightened political tensions, according to the Institute of International Finance.

Rating agencies have downgraded the country and some of its top banks into junk or non-invetsment grade.

Updated: November 7, 2019 03:07 PM

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