BLOM Lebanon PMI Registered Slight Uptick to 46.5 in January 2019

The BLOM Lebanon Purchasing Managers’ Index (PMI) rose from 46.2 in December 2018 to 46.5 in January 2019 on account of softer contractions in output and new orders. Panelists in the survey were the least pessimistic towards the business outlook in 26 months; a reversal in the pessimistic outlook may extend into the following months after the long-awaited government was formed on January 31st. Moreover, the BDL reinitiated subsidized loans but at higher interest rates. The earlier halt on subsidized loans caused a stir in the markets and was seen as a big blow to sentiment.

January also saw Moody’s downgrade Lebanon’s credit rating from B3 with negative outlook to Caa1 with a stable outlook. The downgrade was sparked by talks about debt restructuring, which were later officially refuted. Tension on the Lebanese Eurobonds market was also relieved after Qatar’s pledge to buy half a billion US dollars’ worth of Lebanese Eurobonds.

The balance sheets of the Central Bank and of commercial banks remained solid. The balance sheet of the Lebanese Central Bank, BDL, witnessed a 1.97% monthly increase in total assets to $143.37B in January 2019 and “Foreign assets”, stood at a solid $39.27B. As for commercial banks, the top banks posted high capital adequacy and good returns on capital and equity amid the difficult operating conditions. Aggregate operational net profit of the four banks increased to $1.4 billion in 2018, growing by 4.68% from 2017.

Yearly slumps in the construction and real estate markets continued in 2018. According to the Orders of Engineers in Beirut and Tripoli, the number of construction permits slumped by 16.37% year-on-year (y-o-y) to stand at 13,801 permits by the end of 2018. The Construction Area Authorized by Permits (CAP) also fell by an annual 23.79% to 9M square meters (sqm), indicating investors’ growing interest in smaller construction areas for their projects. According to the data from the General Directorate of Land Registry and Cadastre (LRC), the number of real estate (RE) transactions which may include one or more realties registered an annual decrease of 17.44% to reach 60,714 transactions by December 2018. As such, the total value of the real estate transactions over the period dropped by a yearly 18.04 % to reach $8.13B by December 2018.

However, the number of tourist arrivals grew in 2018. According to the Ministry of Tourism, the number of tourists visiting Lebanon, in 2018, rose by 5.77% year-on-year (y-o-y) as the total number of tourists went up from 1.86M to 1.96M. This increase is owed to the yearly growths recorded in tourist arrivals from Europe and America which together comprised 54.16% of total tourists in Lebanon. European tourists now account for the bulk of tourist arrivals to Lebanon instead of Arab tourists.

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