BLOM Lebanon PMI Drops to Eight-Month Low of 46.0 in June

The BLOM Lebanon Purchasing Managers’ Index (PMI) registered 46.0 in June 2018 compared to 46.4 in May 2018. In fact, Lebanese private sector businesses have been citing local and regional political instability as a constraint for demand month after month.

The implied GDP growth rate derived from the BLOM Lebanon PMI stood at 1.3% for the first half of the year (H1 2018). The GDP for the first half of 2018 is in line with the subdued level of the BLOM Lebanon PMI which averaged 46.6 over the same period. A recent Blominvest study draws on the interesting link between GDP growth and the PMI and concludes that in emerging markets and  at the level of the economy in general not only the private sector, a PMI level of 45.00 corresponds to 0% growth.

Lending has stagnated at the beginning of 2018. According to the Central Bank of Lebanon, the value of loans granted in the financial sector reached $65.01 billion at the end of March 2018, slipping by 0.04% since year-start. The sectors that led the decline in loans are all under the large umbrella of real estate, construction, contracting and the Hotel and Restaurant industries which all have been hardly hit since 2011.  

The urgency of reforms is all the more highlighted by the deficit of the Lebanese Balance of Payments (BOP) in the first four months of the year. According to the Central Bank of Lebanon, the Net Foreign Assets (NFAs) in the financial sector declined by $754.8 million by April 2018 with the NFAs of the Central Bank of Lebanon rising by $1.16 billion and the NFAs of commercial banks declining by $1.92 billion over the same period. The deficit in the Balance of Payments points to the urgency of reforms Lebanon desperately needs.

Lebanon’s Gross Public Debt continued to swell. According to the Ministry of Finance (MoF), Lebanon’s gross public debt reached $81.75B at the end of April 2018, thereby recording an annual uptick of 6.27%. In details, local currency debt (denominated in LBP) constituting 62.62% of total gross debt rose by 8.81% year-on-year (y-o-y) to $51.19B. Moreover, foreign currency (FC) debt, grasping the remaining 37.38%, grew by 2.27% y-o-y to stand at $30.56B.

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