BLOM Lebanon PMI: Output and New Orders Slip Further Into Decline in October

During the month of October, the majority of politicians voted for election next March 2022 despite the president’s office refusal of holding the parliamentary elections around two months ahead of scheduled date for logistical reasons. Moreover, Lebanon’s talks with IMF are expected to officially start in November, followed by much needed monetary aid. In this critical time, it is necessary to implement economic reforms and put an end to the corrupt practices, preferably and even before elections time.  Furthermore, the world Bank’s Economic Update on Lebanon shows that real GDP per capita plummeted by 37.1% and it is projected to decline further by 10.5% by the end of year 2021. As for the national currency, it depreciated by 68% to LBP/USD 19,800 over the past six months in a multiple exchange rate system, and poverty is expected to further increase by 28 percentage point by 2021.

Lebanon’s Consumer Price Index (CPI), which gives an overview about the evolution of goods and services’ prices consumed by households, revealed that Lebanon’s monthly inflation rate soared from 131% in September 2020 to reach a dramatic level of 144.12% in September 2021. The average inflation rate by September 2021 reached 132.98%, higher than the average inflation rate of 66.13% over the first nine months in 2020. Looking at the prices of “Food and non-alcoholic beverages” (20% of CPI), it surged by 280.86% yearly. Moreover, the inflation rate is a major problem for the Lebanese economy, as it will have a disastrous effect on the social security.

However, the real sector shows remarkable resilience.  As such, construction permits witnessed a year-on-year (YOY) increase of 86.67% to reach 10,198 by August 2021. The Construction Area Authorized by Permits (CAP) soared by an annual 129.97% to 4,999,021 square meters (sqm), mainly reflecting the high interest of investors investing in real tangible assets. Moreover, the number of Real estate (RE) transactions which may include one or more realities, went up by a yearly 28.87% to stand at 58,053 transactions by August 2021. In its turn, the value of total RE transactions stood at $8,575.8M by August 2021, compared to $8,389.1M in the same period last year, up by 2.23%. In addition, latest statistics on activity at the Port of Beirut show an annual increase of 17.67% in the revenues of the Port of Beirut (PoB) to $7.469M by August 2021, compared to last year’s $6.34M. Of course, this yearly increase in revenues cannot be viewed in a positive way, as we’re comparing to August 2020 when the port of Beirut was at minimum productivity due to the massive explosion on the 4th of August 2020. We also note that the number of Beirut’s International airport passengers went up by 72.70%, as it recorded 3.10 million (M) passengers in September 2021 compared to 1.79M passengers during the same period last year. Statistics show that total arrivals added 82.91% year-on-year (YOY) to hit 1.47 million by September 2021 and the number of departing passengers climbed by a yearly 68.47% to reach 1,570,957 over the same period.

According to Banque du Liban (BDL) balance sheet, the central bank’s total assets added 4.11% compared to last year, to reach $161.13B by mid of October 2021.The increase was mainly due to the 30.68% year-on-year (YOY) rise in other assets, grasping 34.47% of BDL’s total assets and reaching $58.76B by mid of October 2021. However, the gold account, composing 10.29% of BDL’s total assets, decreased by 4.99% yearly to reach $16.58B by the same period. Moreover, BDL’s foreign assets decreased by 26.95% YOY to stand at $18.77B by mid of October 2021. Worth mentioning that currency in circulation outside of BDL increased by 69.40% jumping from $16.58B by mid of October 2020 to $28.09B mid of October 2021.

Latest data by the Ministry of Finance indicated that Lebanon’s gross public debt hit $97.75B in June 2021, thereby recording an annual increase of 4.7%. In details, debt in local currency (denominated in LBP) stood at $60.48B in June 2021, total debt denominated in foreign currency (namely in USD) reached $37.27B over the same period. Moreover, Lebanon’s fiscal deficit (cash basis) stood at $658.71M by April 2021, down from last year’s $1,751.01M. In detail, the government revenues (including treasuries) added 5.14% on yearly basis to stand at $3,306.03M by April 2021. On the counterpart, total expenditures (including treasuries) retreated yearly by 19.01% to $3,964.74M by April 2021. It is worth noting that the primary balance which excludes debt service posted a deficit of $58.69M, compared to a deficit of $809.26M during the same period last year.

On 20 October 2021, BLOM Bank and Byblos Bank published their third quarter un-audited, consolidated financials. BLOM financial results show that assets stood at $26.585 billion, lower by 10.54% from end year 2020 and net profits came to $3.101 million compared to $57.155 million in Q3 2020. Byblos total assets stood at $17.40 billion, less by 7.22% than assets at end December 2020. Moreover, the Bank incurred losses in Q3 2021 that amounted to $3.62 million against losses of $8.99 million in Q3 2020. Noting that, these results were impacted by the current crisis affecting the Lebanese economy and financial markets.

Moreover, data published by the Association of Lebanese Banks’ total number of cleared checks in the Lebanese financial system slumped from 4,490,413 checks by September 2020 to 2,555,352 checks by September 2021. Moreover, the value of total cleared checks declined yearly by 29.58% to reach $28.63B by September 2021. Accordingly, the dollarization of cleared checks in terms of value went down from last year’s 64.45% to 51.89% by September 2021. In contrast, the dollarization rate of checks in terms of volume rose from last year’s 50.40% to 52.71% by September 2021. Noting also that, as the exchange rate deteriorates, checks are cashed out at a lower discount rate, which drives banks’ account holders to withdraw bigger amounts in order to cash out same amounts of dollars as before.

Overall, Lebanon observed serious collapse in basic services amid foreign exchange reserves depletion. In turn, the BLOM-PMI index fell to 46.6 despite the formation of a new consensual government and the beginning of serious negotiations with the IMF, noting however the recurrent crises that the government has been subjected to. In consequence, the country needs plenty of good luck and determined work by the new government to reverse these dismal trends, and an elevation of economic priorities over all other concerns.

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