BLOM Lebanon PMI continued its improvement and recorded 48.8 in December 2024 compared to 48.1 in November 2024 but still below the 50 mark, indicating that the Lebanese private sector declined at a softer pace. As the ceasefire agreement was reached on November 27th, 2024, the private sector showed contraction as many small and medium enterprises were destroyed during the war. However, for December 2024, new orders and new export orders contracted at a softer pace as its indices became closer to the stabilization mark of 50.0, thus leading to a marginal contraction of output. Despite this marginal shrinkage in the Lebanese private sector, surveyed businesses revealed their optimism regarding the upcoming 12 months as Future Output Index recorded all time-high of 61.8. As per these businesses, the main reason behind their optimism is the ceasefire agreement that ended the war escalation.
That said, as per the Central Administration of Statistics (CAS), the Consumer Price Index (CPI), representing the evolution of goods and services’ prices consumed by households, revealed that Lebanon’s annual inflation rate fell to 15.38% in November 2024, from 15.68% in October 2024, recording its lowest level since February 2020. On a monthly basis, the Consumer Price Index (CPI) rose by 2.3% in November 2024. The drop in annual inflation is partly due to increased dollarization in the economy and the stabilization of the exchange rate at around 89,500 LBP per USD. In details, it is worthwhile to note that Food & Non-alcoholic Beverages (20% of CPI) increased by 23.19% YOY, Health (7.7% of CPI) surged by 23.02% YOY, Owner Occupied (13.6% of CPI) soared by 30.73% YOY and Miscellaneous Goods & Services (4.1% of CPI) rose by 35.31% YOY during the same period. It is worth mentioning that “New Rent” increased YOY by 34.8% as the escalation of the war forced around 25% of Lebanese population who are living in South Lebanon, Bekaa, and Nabatieh governorates in addition to the Southern Suburbs of Beirut to move to other areas, therefore the demand exceeded the supply of apartments for rent which lead to an increase in rent expenditures.
The number of airport passengers dropped by 53.24% to 151,248 in November 2024 compared to the previous month as overall airport activity remained under pressure in November due to safety concerns, high ticket prices, and the fact that Middle East Airlines was the only regular operator, with other airlines making only occasional flights. Since the start of the year until November 2024, the number of airport passengers fell by 20.83% to 5,242,306 passengers compared to the same period last year. Additionally, concerns about potential Israeli strikes on Beirut’s airport have further exacerbated the situation especially that few strikes were very close to the airport.
Moreover, total cumulative container activity dropped by 8.4% annually to 640,843 TEU by October 2024. Transshipment activity, which involves cargo transferred from one ship to another at an intermediate port, decreased by 28.12% to 171,526 TEU during the same period due to higher insurance and shipping premiums and safety concerns, leading to the redirection of some cargo to other ports. Meanwhile, container activity, referring to cargo loaded onto or unloaded from ships at the port; saw a slight increase of 1.8% to 469,317 TEU, indicating that the sum of local demand and supply for goods remained relatively stable.
The Association of Lebanese Banks (ABL) reported that the total number of cleared checks in the Lebanese financial system decreased remarkably by 57.76% year over year (YoY) to 173,750 checks by November 2024. However, the cumulative value of cleared checks in local currency increased by 20.79% YoY to LBP 72,329B by November 2024. This upsurge in value of Lebanese checks given that the number of Lebanese checks issued decreased reflects a larger percentage of discounting Lebanese checks in the market. However, the cumulative value of cleared checks in foreign currency dropped by 60.82%YoY to $1,218M by November 2024. In addition, Banque du Liban (BDL) recently issued Circular 165, which permits depositors to make payments by check starting June 1st, 2023, as long as their accounts are in either fresh US dollars or Lebanese lira. To support this initiative, BDL has introduced a new clearing system, distinct from the one dedicated to pre-crisis deposits. This circular serves a dual purpose: it encourages customers to open new accounts in both Lebanese pounds and US dollars, while also aiming to decrease the country’s dependence on cash and stimulate economic recovery. As such, in November 2024, the cumulative number of checks issued from fresh accounts reached 28,522, of which 19,955 checks are in USD currency amounting $262.08M and 8,567 checks are in LBP currency amounting LBP 15,723B. On a monthly basis, the number of cleared checks in November 2024 was 3,405 checks.
According to the balance sheet of Banque du Liban (BDL), the Central Bank’s total assets declined by 12.91% annually, to reach $93.75B by mid December 2024, amid adopting the 89,500 LBP/USD official rate by BDL since February 1st 2024. The fall was mainly due to the 96.08% year-on-year (YOY) drop in other assets, which reached $300M by mid December 2024. Furthermore, the gold account, representing 26.28% of BDL’s total assets, increased by 30.79% yearly to reach $24.64B by mid December 2024. BDL foreign reserve assets, consisting of 10.85% of total assets (after transferring the Eurobonds to securities portfolio and the other resident and / or illiquid assets to loans to financial sector) rose by 9.1% YOY and stood at $10.18B by mid December 2024. Additionally, foreign reserve assets increased by $25.86M in the first two weeks of December 2024, despite the two months payments for circulars 158 and 166 and the payments for USD public wages. On the liabilities front, financial sector deposits, representing 91.2% of BDL’s total liabilities, decreased by 3.89% annually and reached $85.5B by mid December 2024 compared to last year, of which more than 90% are denominated in dollars. Moreover, public sector deposits, representing 6.45% of BDL’s total liabilities, dropped by 51.21% yearly and reached $6.04B by mid December 2024. Lastly, currency in circulation outside of BDL, consisting of 0.67% of BDL’s total liabilities, plunged by 84.12% annually to reach $624M by mid December 2024 amid adopting the 89,500 LBP/USD official rate by BDL, though it increased by $67 million in the first two weeks of December 2024.
According to Lebanon’s consolidated commercial banks’ balance sheet, total assets declined by 7.89% on year over year (YoY) basis to stand at $103.4B by October 2024 amid BDL’s adoption of a new exchange rate of LBP 89,500 per USD effective 31/01/2024. On the assets side, currency and deposits with Central Bank represented a high figure of 78% of total assets; they dropped annually by 4.26% to settle at $80.64B in October 2024. Deposits with the central bank (BDL) represented 99.92% of total reserves, and decreased by 3.7% YoY, to reach $80.58B in October 2024. Furthermore, vault cash in Lebanese pound declined by 87.91% on a yearly basis to stand at $68.08M by the same period. On the liabilities side, resident customers’ deposits were the main account, representing 65.2% of total liabilities; they dropped by 6.96% since October 2023 to reach $67.41B by the month of October 2024. In more details, deposits in foreign currencies (being 99.07% of resident customers’ deposits) declined by 3.84% YoY to reach $66.78B by October 2024, additionally deposits in LBP (0.93% of resident customers’ deposits) fell by 79.09% YoY to stand at $628.8M by October 2024 especially after applying the new official exchange rate of 89,500. As for non-resident customers’ deposits, grasping 20.29% of total liabilities, they recorded a drop of 1.13% and stood at $20.98B in October 2024. In details, the deposits in LBP fell by 83.92% to reach $30.4M and deposits in foreign currencies declined by 0.39% to reach $20.95B over the same period. In addition, non-resident financial sector liabilities held 2.44% of total liabilities and decreased by 16.44% YoY to reach $2.52B in October 2024.
As per BDL’s latest monetary report, the Balance of Payments (BoP) recorded a surplus of $8,213.8M by October 2024, far higher than the surplus over the same period last year of $1,460.1M. Net Foreign Assets (NFAs) of BDL rose by $7,383.4M and the NFAs of commercial banks increased by $830.4M by October 2024. In the month of October 2024, the NFA of BDL increased by $725.1M and the NFA of commercial banks rose by $1,023.7M, generating a surplus of $1,748.8M. The significant increase in the change of BDL NFA is mainly explained by the increase in the value of the Monetary Gold.
Also, according to market sources, Lebanese car market expanded by 54.94% YoY by November 2024 to 7,589 cars. On a monthly basis, 426 cars were sold in November 2024 in which Japanese cars grasped the lion’s share with a stake of 38%, followed by Korean cars (26%) and European cars (20%). Lebanon’s car sector has undergone some fluctuations in the last 4 years, and sales of passenger vehicles were significantly lower than 2019 levels when cars were still being purchased through checks. Currently, the demand for new vehicles is restricted by the absence of financing options, exacerbated by the lower purchasing power of the people, though it has been improving in the past few years.
In addition, data from the Orders of Engineers in Beirut and Tripoli, the total cumulative construction permits witnessed a cumulative year-on-year (YOY) decrease of 15.84% to reach 8,441 permits by November 2024, as the Israeli-Hezbollah conflict continued for most of the month, ending with a ceasefire on November 27. However, the Construction Area Authorized by Permits (CAP) increased by 10.44% to record 4,552,750 square meters (sqm). This could be explained by the increased tendency for group projects rather than individual projects. Moreover, construction activity witnessed some fluctuation compared to last year. Some governorates witnessed an increase such as Beirut, North Lebanon, and Bekaa while other governorates’ activity decreased like Mount Lebanon, South Lebanon, and Nabatieh. Across the governorates, Mount Lebanon grasped 40.50% of total permits, and accounted for 3,419 permits by November 2024 compared to 3,492 by November 2023. Regarding South governorate, it came second and represented 23.20% of total permits; its number of permits recorded 1,958 permits compared to 2,931 by November 2023. In Nabatieh, 1,189 permits were registered by November 2024, representing 14.09% of total permits, compared to 2,153 permits in the previous year. Furthermore, Bekaa governorate followed with 1,151 permits and representing 13.64% of total permits by November 2024, compared to 926 permits by November 2023. Beirut governorate’s share of permits was 4.49% with 379 permits only compared to 280 permits by November 2023. It is to be noted that South Lebanon and Nabatieh governorates witnessed a remarkable decrease in the number of permits compared to the same month last year, 33.20% and 44.77% respectively, due to the intensity of the war in these areas.
On a different note, the latest report published by the World Bank on Lebanon for fall 2024 “Lebanon Economic Monitor – Mounting Burdens on a Crisis-Ridden Country” discussed the economic impact of the war on Lebanon, and it used a new and interesting approach to measure economic activity, namely “Night-Time Lights” (NTL). The critical escalation of the war in Lebanon caused mass internal displacement and destruction in many small and medium enterprises across five governorates, hence severely affecting economic activity in these governorates, being Mount Lebanon (Dahieh), South Lebanon, Nabatieh, Baalback – El Hermel, and the Bekaa. As such, given these estimations, $2.94 billion was the loss to GDP (consumption) implied from NTLs for 2024 and the majority of it was in the fourth quarter upon the escalation of the war, whereas shocks to consumption in the first three quarters were relatively small and in South Lebanon and El Nabatieh governorates only as the war was still on the southern border of Lebanon before escalating and reaching Baalbek, Bekaa and Mount Lebanon (Dahieh).
Moreover, a report published by the Food and Agriculture Organization (FAO) and the World Food Programme (WFP) in July 2024 stated that a combination of economic instability, escalating conflict, and structural deficiencies in agriculture and market systems left Lebanon facing an unmatched food security crisis. Nearly one-fourth of the Lebanese population is in acute food insecurity, with enduring effects on vulnerable communities, particularly refugees. Also, the combination of limited agriculture productivity, high import dependency, inflation, and disrupted supply chains has worsened the situation, creating an urgent need for both immediate and long term solutions. The intensification of conflict since September 2024 has severely impacted market functionality, especially in southern and eastern regions. By mid-October 2024, the WFP reported that 44% of shops in South Lebanon, 69% in the southern suburbs of Beirut, and 82% in Nabatieh were non-operational. These disruptions have exacerbated food shortages and triggered localized price surges, with the cost of food baskets increasing by 4.5% in just a few weeks. Supply chains have remained functional in less affected areas, but their resilience is under significant strain. Not only Lebanese nationals are facing food security crisis, but also refugees as Lebanon hosts a large population of Syrian and Palestinian refugees, many of whom face acute food insecurity; over 50% of Syrian refugees depend on low quality diets and humanitarian aid, while Palestinian refugees experience similar challenges. These populations are particularly vulnerable due to their reliance on informal labor markets and decreasing assistance programs.
Likewise, UNDP, World Bank and other international organization did some preliminary estimates about losses that were incurred by various sectors due to the latest war with Israel. Housing – real estate losses were around $3.2 billion due to damages in housing units, loss of rental income, and increased displacement. Commerce losses were around $1.9 billion due to damaged establishments and supply chain disruptions. Agriculture sector incurred losses from destroyed crops, burned land, displaced farmers, and livestock damage of around $1.3 billion. Tourism lost around $1.1 billion as tourists arrivals and hotel occupancy dropped in addition to destruction of heritage sites.
In conclusion, December PMI rose for the second month in a row from 44-month low of 45.0 in October to record a 9-month high of 48.8 at year end, signaling slower contraction of private sector business activity. The improvement in the PMI is attributed to several reasons, mainly the ceasefire agreement that ended the war escalation in addition to the potential election of a new president for the Lebanese Republic on the specified election date on January 9th, 2025. The election of a new president and the formation of a reform-committed government will enhance domestic and foreign confidence that will result in re-construction of destroyed businesses and residential buildings, and of course to the expansion of the Lebanese economy. On an interesting and novel note, one of the decisions that the new government has to take is to implement the regulatory framework necessary to fully harness of cannabis farming for medical and industrial purposes. As per McKinsey and Company report, titled Lebanon Economic Vision issued in early 2019, it is estimated that cannabis could generate up to $4 billion annually. And by the way, these potential annual revenues exceed the potential $3 billion conditional loan that Lebanon could receive from the International Monetary Fund (IMF) in installments over several years in case Lebanon finalized the agreement and implemented the specified reforms.
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