With the ongoing presidential vacuum ever present,the economic growth had its toll on Lebanon’s Balance of Payments (BoP) that recorded its largest deficit in 10 years of $850.2M in Q1, compared to a surplus of $301.4M, during the same period last year. This came despite a 23.12% year-on-year (y-o-y) surge in tourist numbers and the 25.91% fall in the trade deficit in Q1. The contraction could be attributed to the falling of Foreign Direct Investments (FDIs), especially in the real estate sector, from GCC economies following the slump in oil prices. Furthermore, there has been a reduction in US dollar value of remittances, illustrated by the average 17.39% annual Euro depreciation vs the Dollar by March, from European countries (knowing that these constitute around 17% of total remittances).
Up until March, Net Foreign Assets (NFA) of the Central Bank (BDL) grew by $1.35B y-o-y, while that of commercial banks dropped by $2.20B.
In March alone, Lebanon’s BoP also recorded a deficit of $417M, compared to a lower deficit of $152.6M a month earlier, possibly on the back of a broadening trade deficit from $1.08B in February 2015 to $1.25B in March. NFAs of BDL increased by $524M while that of commercial banks declined by $942M, from the prior month.
Balance of Payments in Q1
Source: Banque du Liban