In May 2023, Lebanon’s economy faced ongoing challenges amidst a volatile environment. Blom Lebanon PMI, which serves as an economic indicator, saw a slight decrease from 49.5 in April to 49.4 in May, signifying a slower rate of deterioration. Nevertheless, despite the prevailing difficulties, Lebanon’s private sector has exhibited remarkable resilience and adaptability. This was evident as new export orders experienced the fastest growth in nearly eight years. Throughout May 2023, Lebanon witnessed a surge in export activities across diverse sectors such as agriculture, manufacturing, and technology. These industries utilized their resourcefulness to capitalize on international market demand, presenting opportunities for economic recovery. The increase in exports not only highlights the private sector’s ability to navigate the crisis but also provides a glimpse of hope for Lebanon’s economic revival.
However, the challenges faced by Lebanon’s private sector are intertwined with a broader context of economic instability. As such, Lebanon’s political instability, soaring inflation, and a depreciating currency continue to exert pressure on businesses and households alike. Amidst the economic turmoil, another blow has been dealt as Interpol has charged Riad Salameh, the central bank governor, with legal implications. This development adds a new layer of complexity to an already precarious situation. The charges against Salameh underscore the need for transparency and accountability within Lebanon’s financial institutions, as the country grapples with rebuilding trust in its economic governance structures.
We will now delve into the subsequent sections to examine and discuss the keys findings obtained:
Bank Audi published its non-audited financial results for the first quarter (Q1) of year 2023 on 1/6/2023. In more details, Bank Audi’s net profit amounted to $51.63 million compared to losses of $7.27 million in Q1 2022. As to assets, they stood at $18.51 billion, less by 31.26% relative to end 2022; deposits reached $16.19 billion, down by 18.77%; loans stood at $2.90 billion, less by 26.24%; and shareholders’ equity were $1.37 billion, down by 65.94%.
The activity at Rafic Hariri International Airport improved in the fourth month of 2023 compared to the same month last year. In fact, the number of Beirut’s International airport passengers added 26.88% on annual basis and recorded 1,905,686 passengers by April 2023. The breakdown of the airport’s statistics revealed that total arrivals jumped by 26.81% year-on-year (YOY) to stand at 925,773 by April 2023 compared to 730,069 by April 2022. Meanwhile number of departing passengers climbed by a yearly 27.98% to reach 975,397 by April 2023, compared to 762,131 by April 2022. Nevertheless, transit passengers dropped from 9,797 by April 2022 to 4,516 transit passengers by April 2023. On a monthly basis, the activity at Rafic Hariri International Airport improved in April 2023 with total passengers rose remarkably by 16.64% compared to the month of March. In fact, arrivals increased by 30.81% and departures rose by 44.14% in April.
Lebanon’s inflation rate peaked in April 2023 and registered a historical all-time high level of 268.78%. Unfortunately, the inflation headline was historically the highest one registered in Lebanon as beginning March 1, 2023 Lebanon’s supermarket started to list their prices in US dollars, mainly due to the rapid deterioration of the domestic currency against the dollar. In addition, customs dollar rate has been adjusted from 15,000 LBP/USD to 60,000 LBP/USD, by April 18, 2023, which adds more pressure on prices. In more details, the cost of “Housing and utilities”, inclusive of water, electricity, gas and other fuels (grasping 28.4% of the CPI) added a yearly 151.02% by April 2023. Also, “Owner-occupied” rental costs increased by 130.29% year-on-year (YOY) and the prices of “water, electricity, gas, and other fuels” followed a significant increase by 203.74% YOY. Looking at the prices of “Food and non-alcoholic beverages” (20% of CPI), it surged by 349.98% yearly. In the same token, costs of “Clothing and Footwear” (5.2% of CPI) surged by 328.76% by April 2023, and the prices of “Communication” (4.5% of the CPI) increased by 609.58% as mobile phone bills are currently charged in dollars at Sayrafa rate, which stood at LBP 86,500 per USD by end of April 2023.
According to the data revealed by “Rasamny Younis Motor sal”, Lebanese car market deteriorated by 51.7% annually in April 2023. In fact, on a monthly basis, 822 cars were sold in the month of April 2023 compared to 1702 in April 2022. In more details, during the month of April 2023, cars were distributed as follows: Japanese cars took the highest share of 46%, European cars accounted for 26%, and American Cars grasped 13% of the total. Noting that the leading sellers of vehicles in Lebanon are Toyota, Nissan and Chevrolet, with number of vehicles sold in the month of April alone totaled 166, 90, and 76 respectively, out of 822 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 11.31% by the month of March 2023. Overall, Total container activity including transshipment (TEU+TS) increased by a yearly 11.31% to stand at 180,414 twenty-foot equivalent unit (TEU) for the month of March 2023, with transshipment activity (TS) adding 69.35% YOY to 53,290 TEU, while container activity (TEU) dropped by 2.67% on a yearly basis to 127,124 TEU by March 2023. On a monthly basis, total container activity added 10.79% to stand at 64,107 twenty-foot equivalent units (TEU), while container activity (TEU) dropped by 1.41% for the month of March 2023 compared to same month last year to reach 45,708 TEU. Meanwhile, transshipment activity (TS) grew by 59.93% to 18,397 TEU for the month of March 2023, compared to 11,503 TEU in March 2022.
According to the balance sheet of Banque du Liban (BDL) by mid-May 2023, the central bank’s total assets fell by 38.32% compared to last year, to reach $103.26B amid adopting the 15,000 LBP/USD official rate by BDL. The fall was mainly due to the 82.08% year-on-year (YOY) drop in other assets, grasping 11.58% of BDL’s total assets and reaching $11.96B by mid-May 2023. Furthermore, the gold account, representing 18.01% of BDL’s total assets, increased by 10.63% yearly to reach $18.59B by mid-May 2023. BDL’s foreign assets, consisting of 14.1% of total assets dropped by 9.36% YOY and stood at $14.56B by mid-May 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 $1,288.75M in the first two weeks of May 2023, meanwhile, BDL’s foreign assets increased by $101.33M 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 36.9% percentage points (pp) by March 2023, down from last year’s percentage of 43.6%. It is unfortunate that Lebanon has the lowest hotel occupancy rate among all Arab countries, despite his favorable Mediterranean weather, cheaper tourism, as well as attractive winter season. In fact, we assume that Lebanon is most likely welcoming expats rather than tourists in the high season of holidays and summer due to high country risk. In more details, the average room rate in dollars currency in Lebanon has decreased significantly by 28.7% to stand at $43 while the RevPAR dropped by 39.7% to reach $16 for the month of March 2023. Moreover, the average room rate in Lebanese pound has increased significantly by 221% due to the sharp deterioration of the national currency despite the drop in room rate in dollars prices. In details, the average room rate in LBP reached LBP 4,578,200 in March 2023 while RevPAR (Revenue per available room) jumped by 171.5% from LBP 622,144 in March 2022 to LBP 1,689,365 in March 2023.
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 732,712 checks by April 2022 to 190,418 checks by April 2023. Moreover, the cumulative value of cleared checks in local currency increased remarkably from LBP 10,961B by April 2022 to LBP 17,963B by April 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 $4,070M by April 2022 to $1,688M by April 2023. Moreover, the volumes of cleared checks in Lebanese Pounds and foreign currencies witnessed significant yearly drops of 62.51% and 85.88% respectively to settle at 139,512 and 50,906 checks, by April 2023. Accordingly, the dollarization rate of checks in terms of volume fell from 49.21% in April 2022 to 26.73% in April 2023. Notably, the number of returned checks fell substantially by 68.67% YOY to stand at 1,635 checks. Moreover, the value of returned checks in foreign currency increased by 1.75% by April 2023 to reach $58M, additionally the value of returned checks in local currency increased remarkably by 511.86% YOY to reach LBP 361B by April 2023.
Moreover, the data released by the Ministry of Finance (MoF) recently indicated that Lebanon’s gross public debt hit $101.82B in December 2022, thereby recording an annual increase of 1.4% YOY. The rise is mainly attributed to the annual increase in foreign currency debt (namely in USD) by 7.32%, to stand at $41.34B by December 2022. In turn, total foreign debt grasped a stake of 40.6% of the total public debt by December 2022. It is worth mentioning that $14.23B 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 2.24% to stand at $60.48B in December 2022, and constituted 59.4% 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 12.56% YOY to $42.93B in December 2022.
According to BDL’s latest monetary report, the BOP recorded a surplus of $1.17B by March 2023, far exceeding the deficit over the same period last year of $1.47B. Accordingly, Net foreign Assets (NFAs) of BDL fell by $830.1M, as BDL has continued to make some intervention on Forex market through the “Sayrafa” rate while the NFAs of commercial banks rose by $2B by March 2023.
As for Lebanon’s consolidated commercial banks’ balance sheet, total assets decreased annually by 33.32% to stand at $115.15B by March 2023 amid BDL’s adoption of a new official exchange rate of LBP 15,000 per USD. On the assets side, currency and deposits with Central Bank represented a high figure of 74.2% of total assets; they dropped annually by 24.2% to settle at $85.44B in March 2023. Deposits with the central bank (BDL) represented 99.14% of total reserves, and decreased by 23.01% YOY, to reach $84.7B in March 2023. Furthermore, Vault cash in Lebanese pound fell by 72.72% on a yearly basis to stand at $738.6M by the same period. The drop is attributed to the calculation based on the new official exchange rate of LBP 15000 per USD. On the liabilities side, resident customers’ deposits were the main account, representing 65.11% of total liabilities; they decreased by 26.95% since March 2022 to reach $74.97B in the month of March 2023. In more details, deposits in foreign currencies (95.8% of resident customers’ deposits) decreased by 7.82% YOY to reach $71.82B by March 2023, additionally deposits in LBP (4.2% of resident customers’ deposits) fell by 87.27% YOY to stand at $3.15B by March 2023. Noting that Lebanon has become dollarized and cash based.
Despite these developments, BLOM Lebanon PMI registered signs of contraction but at a softer pace with the headline PMI index posting 49.4 in May, down from 49.5 in April and 49.7 in March. Lebanon’s private sector has emerged as a resilient force amidst the country’s economic turmoil in May 2023. However, it is essential to acknowledge that the private sector’s resilience alone cannot solve Lebanon’s complex economic crisis. Structural reforms, transparent governance, and a supportive business environment are crucial to foster sustained growth and attract domestic and foreign investments. Lebanon’s government, policymakers, and institutions must work collectively to address the root causes of the crisis and implement measures that promote stability, strengthen institutions, and enhance the business climate.
In conclusion, while Lebanon’s private sector showcases resilience and potential, a comprehensive and coordinated approach is necessary to overcome the multifaceted challenges facing the nation. By fostering an environment conducive to business growth, implementing structural reforms, and ensuring transparent governance, Lebanon can pave the way for a more stable and prosperous future. The private sector’s ability to adapt and innovate provides hope, but sustained recovery requires collaborative efforts from all stakeholders, with a focus on long-term sustainable solutions.