A bare uptick in the BLOM Lebanon Purchasing Managers’ Index (PMI) from 45.6 in August to 45.8 in September still hints at a gloomy operating environment for the Lebanese private sector.
Lebanon has now entered a stage of stagflation. Stagflation is a phenomenon whereby the economy is experiencing low growth (the PMI derived growth stands at %1 in September), high inflation (average inflation of 6.29% y-o-y by August) and high unemployment. Regularly published economic indicators such as cleared checks, construction permits and real estate transactions continue to pinpoint a downward trend making the need for reform ever more pressing.
Weak demand has been a core factor in pulling the PMI down and that has been strikingly reflected in the real estate and construction sectors. According to the data from the General Directorate of Land Registry and Cadastre (LRC), the number of RE transactions which may include one or more realties, decreased yearly by 20.16 % to reach 38,102 transactions by August 2018. In its turn, the value of total RE transactions stood at $5.15B, also contracting by 20.57% year-on-year (y-o-y).
Tighter economic conditions led to a decline in the number of construction projects or/and to a shift towards smaller residential units. According to the Orders of Engineers in Beirut and Tripoli, the number of construction permits declined by an annual 17.78%to settle at 9,326 permits by August 2018. The Construction Area Authorized by Permits (CAP) also slipped by 25.11% year-on-year (y-o-y) to stand at 6.40M square meters (sqm).
The cleared checks data is also showing a downtrend. According to the Association of Lebanese Banks (ABL), the value of cleared checks reached $44.11 Billion (B) by August 2018, down by 3.67% compared to the same period last year. Likewise, the total number of cleared checks fell by 3.96% year-on-year to reach 7.89M by August 2018. Moreover, the share of returned checks in the total number of cleared checks rose from 1.87% by August 2017 to 2.24% by August 2018.
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