BLOM PMI at 47.7, Its Highest Reading for nearly 2.5 Years

During the month of July 2019, Lebanon’s Purchasing Managers’ Index (PMI) recorded its highest reading since 2.5 years ago, with the index standing at 47.7 points, still below the neutral mark of 50 points separating economic contraction from growth. However, the indicator’s improvement is a good sign, affirming a decelerating rate of deterioration of the Lebanese private sector’s operating conditions. In fact, on the fiscal front, Lebanon’s cash basis -fiscal deficit continued to narrow for the second consecutive month, falling by an annual 18.2% to $2.39B by May 2019 after recording a 28% yearly decline the month before. This emits signals of the country gradually moving onto a promising fiscal consolidation path, noting that the 2019 state budget also came into effect end-July. BDL’s latest figures also revealed Lebanon’s Balance of Payments deficit contracted to $5.39B in H1 2019, compared to $208.3M in H1 2018. Furthermore, Lebanon’s tourism sector remained a bright spot in the economy, as the number of tourists increased by a yearly 8.3% to hit 923,820 by June 2019, noting that the number of European tourists increased by a substantial 10.3% YoY to 330,928 which constituted the highest historical figure for the country in H1. In turn, tourists from Saudi Arabia alone rose by an annual 90.8%to reach 44,736 tourists while those from Kuwait also climbed by a yearly 44.6% to 23,420 tourists over the period.

Commenting on the July 2019 PMI results, Dr. Fadi Osseiran, General Manager of BLOMINVEST Bank, said: “The PMI registered a 47.7 in July 2019, the highest reading since 2.5 years ago and therefore associated with a monthly growth rate of 0.5% to 1%. This is great news, with the main PMI sub-indices: output, new orders, prices, exports, and purchases recording softer falls. Lebanon’s tourism, a main growth driver, witnessed an overflow of tourists and increased spending patterns in H1 2019. The Ministry of Finance reports also reflected a plausible fiscal consolidation in the first 4 months of 2019. Lebanon’s cash deficit contracted by an annual 28% while the government endorsed the 2019 budget. Pressures began to ease on the operating environment, but restoring investors’ confidence will necessitate strong political will and transparency in the implementation of the budget and proposed reforms.”

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