The month of April witnessed a relative improvement at the level of PMI, as it recorded an 11-month high on the fourth month of the year. For one thing, the BDL is trying to limit the deterioration of the national currency by interfering on the parallel market through the circular 161. This kind of intervention is creating some stability on the market, helping to score a relatively higher PMI. Of course, the PMI is still under 50, while Lebanon is in front of several critical events like the parliamentary elections that will happen on the 15th of May, and the results of this election will help to identify the economic path that the country could take.
Accordingly, Lebanon’s monthly inflation rate registered a high of 208.13% by March 2022 up from 157.86% in March 2021. In details, the cost of “Housing and utilities”, inclusive of water, electricity, gas and other fuels added a yearly 99.71% by March 2022 and prices of “Food and non-alcoholic beverages” surged by 390% yearly. The high inflation rate in Lebanon is eroding the purchasing power of Lebanese citizens, as the majority of them are getting paid in Lebanese lira. In this sense, the stability of the Fx rate is mandatory in order to maintain an acceptable inflation rate.
Real estate transactions witnessed an annual jump of 769% to reach 17,997 transactions by the month of February 2022. In its turn, the value of total RE transactions stood at $2.69B by February 2022, compared to $290.26M in the same period last year, up by 829.31%. As for airport passengers, the activity at Rafic Hariri International Airport improved in the third month of the year 2022 to reach 1,103,862 passengers by March 2022, up by 100.94% by March 2021. Total arrivals added 118.53% year-on-year (YOY) to stand at 514,736 passengers by March 2022. The number of departing passengers climbed by a yearly 96.15% to reach 581,756 over the same period. Worth noting that Lebanon was under a strict lockdown for the first couple months of year 2021 which explain the remarkable increase witnessed in the volumes of passengers for the same period this year.
In terms of the balance sheet of Banque du Liban (BDL), the central bank’s total assets added 7.7% compared to last year, to reach $166.63B by the end of April 2022. The increase was mainly due to the 31.66% year-on-year (YOY) rise in other assets, grasping 39.07% of BDL’s total assets and reaching $65.1B by end of April 2022. BDL’s foreign assets dropped by 8.84% since year start to stand at $16.25 B, with a $229.37M drop in the month of April 2022. The Central Bank, as mentioned at the outset, is most likely taking measures to absorb Lebanese liquidity from the market through Circular 161 (Sayrafa) with the objective to appreciate the local currency.
The data published by the association of Lebanese Banks’ showed that the total number of cleared checks in the Lebanese financial system slumped from 911,875 checks by March 2021 to 565,271 checks by March 2022. Moreover, the value of total cleared checks decreased yearly by 14.73% to reach $8.52B by March 2022. In details, the value of checks in LBP increased on year-on-year (YOY) to reach $5.53B, while value of checks in foreign currencies slumped by 48.86% YOY to reach $1.99B by March 2022. Accordingly, the dollarization of cleared checks in terms of value went down from last year’s 38.78% to 23% by March 2022.
Moreover, data released by the Ministry of Finance (MoF) recently indicated that Lebanon’s gross public debt hit $100.38 by December 2021, thereby recording an annual increase of 5%. The rise is mainly attributed to the annual increase in both local and foreign currency debt by 3.89% and 6.84%, respectively. As such, domestic debt constituted 61.63% of the total public debt.
It is worth noting that BOP recorded a deficit of $954.9M by the second month of 2022, compared to a deficit of $751.2M by February 2021. Accordingly, Net foreign Assets (NFAs) of BDL fell by $1028.2M, while the NFAs of commercial banks added $73.3M by February 2022.
As for Lebanon’s consolidated commercial banks’ balance sheet, total assets decreased by 7.28%, and stood at $172.7B by February 2022. In details, resident customers’ deposits (which grasp 59.43% of total liabilities) decreased by 5.4% to $102.63B by March 2022, as deposits in LBP increased by 2.17% to $24.71B while the deposits in foreign currencies declined by 7.58% to stand at $77.91B.
PMI dropped further below the 50-threshold and stood at 47.9 in April 2022 amid the continuous economic crisis. In details, the PMI has slightly increased from 47.4 in March to 47.9 in April. Of course, this increase doesn’t reflect any improvement on the overall Lebanese economy; however we have witnessed a soft decline in business activity compared to previous months, as it may be linked to the positive news that was announced by the IMF earlier this month regarding a staff level agreement with Lebanon. The country is at the cusp of some critical events like the parliamentary election that will happen on May 15, and the reform plans that contemplated by the Mikati’ government. As such, the upcoming months are critical and will address the healing process of the Lebanese economy, especially the political implications arising from the elections and the feasibility of implementing the awaited reform program”