The BLOM Lebanon PMI slightly declined to 48.9 in May 2025 from 49 in April 2025, signaling a continued weakening in the private sector performance. This marks the third consecutive month of contraction, reflecting a sustained deterioration in business conditions. Several factors contributed to this weakening. First, political uncertainty remains elevated both domestically and regionally. In Lebanon, the U.S. continues to push for accelerated disarmament of non-state armed groups, even as the government has begun disarming Palestinian refugee camps—a move some view as a tentative step toward addressing Hezbollah’s more complex and politically sensitive arsenal. Regionally, Israel has intensified its military strikes on Gaza to pressure Hamas during ongoing ceasefire negotiations in Qatar, though no agreement has been reached and a near-term resolution appears unlikely. Second, the initial optimism following the election of President Aoun and Prime Minister Salam is beginning to fade. While the new government has enacted some meaningful reforms—such as amending the banking secrecy law—key structural reforms remain stalled, particularly regarding the distribution of financial losses among the government, central bank, lenders, and depositors. As a result, Lebanon’s economic, financial, and social crises remains unresolved, with weak domestic demand, heightened regional instability, and rising shipping costs continuing to weigh heavily on output and suppress both local and foreign orders.
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