The BLOM Lebanon Purchasing Managers’ Index (PMI) rose from 46.2 in October 2018 to 46.7 in November 2018, on account of slower declines in output and new orders since February. Accordingly, the implied GDP-growth would still stand at 1%, a rate likely to be the growth for the full year 2018.
Fiscal pressure remains a major unaddressed vulnerability. Out of the government’s primary expenditures, which reached $4.17B in the period Jan-April 2018, EDL transfers represented a share of 12.5% of the total compared to a share of 11.8% by April 2017. According to the Ministry of Finance, transfers to EDL, the state-owned electricity company, rose by an annual 44% to reach $521.73M by April 2018. It is worth mentioning that this year an amount of $12.67M was paid as “Transfers to Electricity Syria”.
Lebanon’s Gross Public Debt is still assuming an upward trajectory. According to the Ministry of Finance (MoF), Lebanon’s gross public debt reached $83.84B by Q3 2018, inching up by a yearly 7.28% over the period, owing to increases in both, local and foreign currency debt. Accordingly, the debt to GDP ratio now stands at 148%. In details, local currency debt (denominated in LBP) grasped a stake of 57.76% of total gross debt and recorded an annual 0.21% uptick to stand at $48.43B by Sept. 2018. Meanwhile, foreign currency debt rose by a yearly 18.74% to settle at $35.41B, equivalent to 42.24% of Lebanon’s gross debt.
Inflation is still rising due to higher energy prices. According to the Central Administration of Statistics (CAS), consumer prices in Lebanon grew by 6.31% in the first 10 months of 2018 since the average Consumer Price Index (CPI) reached 106.28 by October 2018. In details, the average costs of “Housing and utilities” (water, electricity, gas and other fuels) constituting a combined 28.4% of the CPI, rose by 7.08% year-on-year (y-o-y) by October 2018. In turn, the average prices for “Food and non-alcoholic beverages”(constituting 20% of the CPI) and “Transportation” ( grasping 13.1% of the CPI), registered yearly upticks of 4.90% and 8.81% by October 2018.
The deficit in the balance of payments widened by October 2018. According to the Central Bank of Lebanon, the balance of payments recorded a deficit of $3.12B by October compared to a deficit of $1B by the same period last year. In fact, the NFAs of the Central Bank increased by $1.19B and the NFAs of commercial banks slid by $4.32B over the same period. However, when we adopt the IMF’s way of computing the Balance of Payments (BOP) by not including the Eurobonds held by BDL into its foreign assets, the BOP deficit becomes $5.62B by October 2018.
Amidst these tough operating conditions, banks are still counting on their loyal depositor base. According to the Central Bank of Lebanon, resident customers’ deposits witnessed an increase of 1.04% y-t-d to reach $134.62B by October 2018. Non-resident customers’ deposits also witnessed an increase of 6.64% since the beginning of the year to $37.49B .this was mainly due to the increase in both, deposits in foreign currencies and in LBP by 6.68% and 6.33% respectively to $32.95B and $4.54B respectively.
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