Business conditions in Lebanon’s private sector improved in March to a seven-month high, indicating a slower pace of deterioration, amid a relative increase in new orders, output and stocks of purchases. In fact, the private sector in Lebanon appears to be stabilizing as it increasingly adopts a cash-based and dollarized system. Additionally, Lebanon expects more visitors during the first quarter of year 2023 compared to the previous year, thus bringing relief to the private sector. As such, many services/industries were gearing up for the month of Ramadan and for the upcoming Easter Holidays, which has led to a surge in purchases and stockpiling.
Furthermore, beginning March 1, 2023 Lebanon’s supermarket started to list their prices in US dollars, mainly due to the rapid depreciation of the national currency against the dollar. The move is an attempt by the Ministry of Economy to regulate flagrant price manipulation as the pound continues to depreciate rapidly. As a matter of fact, the Lebanese national currency was oscillating around LBP 99,000 per USD during the month of March, and reached an all-time high of LBP 141,000 per USD on March 21st. Nevertheless, it ended the period at LBP 107,500 per USD mainly due to BDL’s intervention in the market by granting dollar through Sayrafa at the rate of 90,000 LBP/USD.
Year 2022 witnessed a remarkable increase in tourist activity after two years of lockdowns and social unrest. The tourism sector re-picked by end of the year 2022 compared to previous years of 2020 and 2021, but remained relatively lower than year 2019. In details, the number of travelers in Beirut airport increased by an annual of 46.97% totaling 6.35M passengers by December 2022. In tandem, the cumulative number of tourists registered a 64.72% annual surge to stand at 1,465,953 tourists over the same period. Meanwhile, the increase in the cumulative number of tourists for the year 2022 revealed that Europeans constituted the largest portion of total tourists, grasping a lion’s share of 39.85%, while travelers from Arab countries came in second with a share of 26.97%. Tourists from America followed with a stake of 20.89%, and finally Asia grasped 4.28% of total tourists.
In the same token, the activity at Rafic Hariri International Airport improved in February 2023 compared to the same month last year. In fact, the number of Beirut’s International airport passengers added 29.91% on annual basis and recorded 897,989 passengers by February 2023. The breakdown of the airport’s statistics revealed that total arrivals jumped by 30.86% year-on-year (YOY) to stand at 409,838 by February 2023 compared to 313,200 by February 2022. Meanwhile number of departing passengers climbed by a yearly 30.12% to reach 486,094 by February 2023, compared to 373,561 by February 2022. Nevertheless, transit passengers decreased from 4,460 by February 2022 to 2,057 transit passengers by February 2023. On a monthly basis, the activity at Rafic Hariri International Airport declined in February 2023 with total passengers decreased remarkably by 16.84% compared to the month of January. In fact, arrivals fell by 5.13%, while departures dropped by 25.91% in February.
Lebanon’s inflation rate eased from a 214.59% in February 2022 to register softer levels of 189.67% in February 2023, however higher than the previous month of January 2023 at 123.53%. Unfortunately, inflation remains at a historical elevated level and is expected to further increase in the months ahead as Lebanon’s economy seems gradually moving towards a fully dollarized economy especially after supermarket adopting dollar prices. In details, the cost of “Housing and utilities”, inclusive of water, electricity, gas and other fuels (grasping 28.4% of the CPI) added a yearly 77.93% by February 2023. Also, “Owner-occupied” rental costs increased by 21.57% year-on-year (YOY) and the prices of “water, electricity, gas, and other fuels” followed a significant increase by 206.69% YOY. Looking at the prices of “Food and non-alcoholic beverages” (20% of CPI), it surged by 260.54% yearly and “Restaurant and Hotels” (2.8% of CPI) increased yearly by 274.39% by February 2023 as the hospitality sector had been authorized to adopt prices listed in dollars.
According to the data revealed by “Rasamny Younis Motor sal”, Lebanese car market witnessed a significant uptick of 113.53% annually in the beginning of 2023. In fact, on a monthly basis, 647 cars were sold in the month of January 2023 compared to 303 in January 2022 and 333 in the previous month of December 2022. In more details, during the month of January 2023, cars were distributed as follows: Japanese cars took the highest share of 40.03%, European cars accounted for 19.63%, and Korean Cars grasped 18.7% of the total. Noting that the leading sellers of vehicles in Lebanon are Toyota, Kia and MG, with number of vehicles sold in the month of January alone totaled 156, 79, and 48 respectively, out of 647 sold cars.
Furthermore, according to the Customs Administration, Lebanon’s trade deficit totaled $15.56B by December 2022 up from $9.75B registered in the same period last year. Total imported goods added 39.65% annually to $19.05B while total exports decreased by 10.16% to stand at $3.49B by December 2022. In details, the “Mineral products” grasped the lion’s share of total imported goods with a stake of 29.29%. “Machinery; electrical instruments” ranked second, composing 12.87% of the total while “Vehicles, aircraft, vessels, transport equipment” and “Pearls, precious stones and metals” grasped the respective shares of 10.5% and 8.83%, respectively. Meanwhile, the value of imported “Mineral products” jumped by 43.94% YOY, from $3.88B to $5.58B, by December 2022. The increase is mainly attributed to the surge in fuel prices leading to greater costly imported fuel bills. Furthermore, the value of imported “Vehicles, aircraft, vessels, transport equipment” rose significantly by 78.13% from $1.12B to $2B by December 2022.
The latest statistics on activity at the Port of Beirut showed that container activity recorded an annual increase of 6.03% by the month of February 2023. In more details, the revenues of the Port of Beirut (PoB) to $6.40M by October 2021, compared to last year’s $7.54M. We note that no later data on revenue are available as per Port of Beirut statistics. Overall, total container activity including transshipment (TEU+TS) increased by a yearly 6.03% to stand at 110,493 twenty-foot equivalent unit (TEU) for the month of February 2023, with container activity (TEU) dropped by 8.19% on a yearly basis to 77,351 TEU by February 2023, while transshipment activity (TS) added 66.02% YOY to 33,142 TEU by the same month. On a monthly basis, total container activity added 2.56% to stand at 55,623 twenty-foot equivalent units (TEU), while container activity (TEU) dropped by 13.72% for the month of February 2023 compared to same month last year to reach 38,826 TEU. Meanwhile, transshipment activity (TS) grew by 81.86% to 16,797 TEU for the month of February 2023, compared to 9,236 TEU in February 2022.
According to the balance sheet of Banque du Liban (BDL) by end of March 2023, the central bank’s total assets fell by 37.70% compared to last year, to reach $101.35B, amid adopting the 15,000 LBP/USD official rate by BDL. The fall was mainly due to the 83.46% year-on-year (YOY) drop in other assets, grasping 9.95% of BDL’s total assets and reaching $10.07B by end of March 2023. Furthermore, the gold account, representing 17.98% of BDL’s total assets, increased by 2.72% yearly to reach $18.22B by end of March 2023. BDL’s foreign assets, consisting of 14.22% of total assets dropped by 12.57% YOY and stood at $14.40B by end of March 2023, noting that BDL holds in its foreign assets $5B in Lebanese Eurobonds. On a different note, total volume of dollars on Sayrafa platform reached $623M in the second two weeks of March 2023 while BDL’s foreign assets decreased only by $65.96M during the same period.
According to Ernst & Young Middle East hotel benchmark survey, the occupancy rate in Beirut’s 4- and 5-star hotels reached 36.8% percentage points by January 2023, up from last year’s percentage of 34.7% but it is relatively low as Lebanon had the lowest hotel occupancy rate among all Arab countries. Moreover, the average room rate in dollars currency in Lebanon has decreased by 27.7% to stand at $50 by for the first month of 2023 while the RevPAR dropped by 23.3% to reach $18 for January 2023. Although Lebanon enjoys a favorable Mediterranean weather, cheaper tourism, as well as attractive winter season, surprisingly, Gulf countries attract much more tourism activity than Lebanon during all seasons. In addition, we can assume that Lebanon is welcoming most likely expats rather than tourists in the high season of holidays and summer.
According to the data published by the Association of Lebanese Banks’ (ABL), the total number of cleared checks in the Lebanese financial system slumped from 356,777 checks by February 2022 to 93,120 checks by February 2023. Moreover, the cumulative value of cleared checks in local currency increased remarkably from LBP 5,310B by February 2022 to LBP 9,240B by February 2023. This upsurge is driven by a significant increase in value of Lebanese checks which reflects a larger percentage of discounting Lebanese checks in the market. Meanwhile, the cumulative value of cleared checks in foreign currency fell from $1,987M by February 2022 to $1,071M by February 2023. Notably, the number of returned checks fell substantially by 75.4% YOY to stand at 683 checks as checks are less accepted as a mode of payment and the economy is heading towards full cash-dollarization. Moreover, the value of returned checks in foreign currency dropped by 34.38% by February 2023 to reach $21M, while the value of returned checks in local currency increased remarkably by 575.86% YOY to reach LBP 196B by February 2023.
Moreover, the data released by the Ministry of Finance (MoF) recently indicated that Lebanon’s gross public debt hit $101.95B in November 2022, thereby recording an annual increase of 2.1% YOY. The rise is mainly attributed to the annual increase in foreign currency debt (namely in USD) by 7.68%, to stand at $41.07B by November 2022. In turn, total foreign debt grasped a stake of 40.29% of the total public debt by November 2022. It is worth mentioning that $14.03B represents the unpaid Eurobonds, their coupons and accrued interests, due to the default on government Eurobonds in March 2020. Meanwhile, debt in local currency (denominated in LBP) fell slightly by 1.27% to stand at $60.87B in November 2022, and constituted 59.71% of the total public debt. Looking at net domestic debt, which excludes public sector deposits with the central bank and commercial banks, it decreased remarkably by 12.29% YOY to $43.48B in November 2022.
According to BDL’s latest monetary report, the BOP recorded a deficit of $461.5M by January 2023, far exceeding the deficit over the same period last year of $353M. Accordingly, Net foreign Assets (NFAs) of BDL fell by $260.9M, as BDL has continued to make some intervention on Forex market through the “Sayrafa” rate while the NFAs of commercial banks dropped by $200.6M by January 2023.
As for Lebanon’s consolidated commercial banks’ balance sheet, total assets decreased annually by 3.61% to stand at $167.96B by January 2023. Note that valuation in USD is still at the old official rate of 1507.5 LBP/USD and will be changed to 15,000 starting February 2023. On the assets side, currency and deposits with Central Bank represented a high figure of 65.56% of total assets; they dropped annually by 2.79% to settle at $110.12B in January 2023. Deposits with the central bank (BDL) represented 96.48% of total reserves, and slightly decreased by 3.80% YOY, to reach $106.24B in January 2023. Meanwhile, Vault cash in Lebanese pound jumped by 36.41% on a yearly basis to stand at $3.88B by the same period. The increase is attributed to the volumes of cash that banks are receiving from Sayrafa transactions. On the liabilities side, resident customers’ deposits were the main account, representing 59.57% of total liabilities; they decreased by 2.97% since January 2022 to reach $100.05B in the first month of 2023. In more details, deposits in foreign currencies (72.97% of resident customers’ deposits) decreased by 7.70% YOY to reach $73.01B by January 2023, while deposits in LBP (27.03% of resident customers’ deposits) increased by 12.62% YOY to stand at $27.04B by January 2023. Customers seem to deposit more Lebanese pound into their accounts while others are conducting limited withdrawals in foreign currencies; in addition, most of transactions today are only paid in fresh dollars.
In addition, according to Lebanon’s Ministry of Finance, personnel costs slightly increased annually by 0.1% to reach $6.56B at the official rate of 1507.5 LBP per USD, by December 2021, compared to $6.55B by the end of 2020. The increase in personnel cost was mainly driven by a remarkable annual increase in the payments related to retirement compensations by 9.6% or $182.42M to stand at $2.07B. Meanwhile, salaries, wages and social benefits dropped by 2.6% or $104.14M to reach $3.968B while end of service indemnities decreased by 18.6% or $52.40M to $230.84M and transfers to public institutions to cover salaries declined by 6.4% to reach $289.88M by end of December 2021.
Despite these developments, BLOM Lebanon PMI registered signs of contraction but at a softer pace with the headline PMI index posting 49.7 in March, up from 48.8 in February and 47.7 in January. While Lebanon appears to be stabilizing, the PMI index remains below the crucial 50 threshold, likely due to the country’s prolonged presidential vacuum and the unprecedented economic crisis with no signs of reform. Unfortunately, even in a country known for its resilience in the face of adversity, the crumbling of state institutions has left no business unaffected.
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