Lebanon’s private sector slightly recovered in July 2024 as the Purchasing Managers’ Index (PMI) rose to 48.3 from 47.8 in the previous month of June. Nonetheless, the PMI remained still below the 50 threshold, thus implying that business conditions are challenged. The rise in PMI signals an uptick in economic activity as the summer season has invigorated the economy, with an influx of tourists and expats stimulating somewhat new business openings and expansion. This growth reflects perhaps a renewed sense of optimism and resilience in Lebanon’s economy, highlighting its potential for recovery amid ongoing challenges. As the country navigates these complex dynamics, the rise in PMI serves as a hopeful indicator of gradual stabilization and opportunity for future development.
That said, the activity at Rafic Hariri International Airport has decreased in June 2024 for the sixth consecutive month due to the prolonged conflicts on the Lebanese southern border. As such, the cumulative count of passengers at Beirut International airport in 2024 dropped by 5.36% annually, reaching 2,996,323 passengers by June 2024. The breakdown of the airport’s statistics revealed that total arrivals declined by 5.2% year-on-year (YOY) to stand at 1,546,498 passengers by June 2024 compared to 1,631,358 passengers by June 2023. Likewise, number of departing passengers decreased by 5.24% on yearly basis to reach 1,447,105 passengers by June 2024, compared to 1,527,132 passengers by June 2023. Moreover, transit passengers dropped from 7,381 passengers in June 2023 to 2,720 passengers in June 2024. Nonetheless, the monthly statistics showed a rise of 38.89% from May to June 2024 as the summer season approached. In more details, arrivals increased by 51.86% to stand at 406,716 passengers, departures rose by 24.32% to stand at 297,056 passengers and transit grew by 60.57% to stand at 615 passengers by June 2024.
Moreover, according to market sources, Lebanese car market expanded by 10.98% YOY by June 2024, rising from 3,635 cars in June 2023 to 4,034 cars in June 2024. On a monthly basis, 1,325 cars were sold in June 2024. The distribution of cars was as follows: Korean cars took the highest share of 35%, Japanese cars came second and accounted for 34% of car sales, and European Cars grasped 22% of the total. Furthermore, the leading sellers of vehicles in Lebanon were Kia and Toyota with number of vehicles sold in June alone totaled 403 and 201 respectively, out of 1,325 sold cars. It is interesting to note that in June 2024, the share of non-gasoline cars and SUV (Hybrid, Plug-in Hybrid and Fully Electric cars) reached a total of 33 automobiles, out of which 13 were cars and 20 were SUVs. Lebanon’s car sector undergone some fluctuations in the last 4 years, and sales of passenger vehicles were significantly lower than both 2019 and 2020 levels when cars were still being purchased through discounted checks at the beginning of the crisis. Currently, the demand for new vehicles is restricted by the absence of financing options, exacerbated by the depreciating exchange rates of the Lebanese currency.
Additionally, total container activity including transshipment (TEU+TS) decreased by a yearly 6.95% to stand at 295,010 twenty-foot equivalent unit (TEU) for the month of May 2024, with transshipment activity (TS) lessened 11.08% YOY to 86,689 TEU, and container activity (TEU) dropped by 5.11% on a yearly basis to 208,321 TEU by May 2024. On a monthly basis, total container activity decreased by 5.78% to stand at 69,349 twenty-foot equivalent units (TEU). In more details, container activity (TEU) lessened 0.44% for the month of May 2024 compared to same month last year to reach 50,578 TEU while transshipment activity (TS) dropped by 17.69% to 18,771 TEU for the month of May 2024, compared to 22,806 TEU in May 2023.
Also, according to 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 inflation rate remained high as it recorded a yearly 41.78% by June 2024, though less than the rates of 2021 – 2023 mainly due to the stability of the exchange rate at the parallel market especially since August 2023. Meanwhile, the continued escalating political and military tensions in the Middle East and its effect on Red Sea with no resolution seen in the near future pose a significant threat for the shipping companies whose ships pass through Bab el Mandeb Strait, a vital global maritime passageway. Such an occurrence is causing supply chain disruptions, an upturn in shipping costs, and consequently, elevated consumer prices. The implications of these developments may result in a broader surge in inflation. As for Lebanon, already struggling with the political and economic challenges causing persistent high inflation since late 2019, it would encounter heightened difficulties in preserving price stability amid prolonged economic uncertainty. In details, it is worthwhile to note that Education (6.6% of CPI) increased by 587.67% YOY. Also, the cost of “Housing and utilities”, inclusive of water, electricity, gas and other fuels (grasping 28.4% of the CPI) added a yearly 28.07% by June 2024. Similarly, “Owner-occupied” rental costs increased by 43.11% year-on-year (YOY) and the prices of “water, electricity, gas, and other fuels” followed a rise by 11.91% YOY.
According to the balance sheet of Banque du Liban (BDL), the central bank’s total assets declined by 10.51% compared to last year, to reach $94.33B by mid-July 2024, amid adopting the 89,500 LBP/USD official rate by BDL since February 1st 2024. The fall was mainly due to the 97.65% year-on-year (YOY) drop in other assets, which reached $157.04M by mid-July 2024 compared to $6,695M by July 15th, 2023. Interesting to mention that based on Central Council decision number 23/36/45 dated 20/12/2023, all previous Central Council decisions related to Seigniorage were suspended and all deferred interest costs emanating from open-market operations were presented under a new line item. As a result, all deferred interest costs included in Other Assets and Assets from Exchange Operations amounting to LBP 118.97 Trillion as of 31/12/2023 were transferred to “Deferred Open-Market Operations”. Furthermore, the gold account, representing 23.55% of BDL’s total assets, increased by 23.13% yearly to reach $22.21B by mid-June 2024. Moreover, BDL’s foreign assets, consisting of 16.4% of total assets, rose by 7.48% YOY and stood at $15.47B by mid-July 2024, while it increased by $349.75M in the first two weeks of July 2024. Additionally, BDL holds in its foreign assets $5B in Lebanese Eurobonds.
As per BDL’s latest monetary report, the balance of payments (BOP) recorded a surplus of $786.1M by May 2024, far less than the surplus over the same period last year of $1,231.3M. Accordingly, Net Foreign Assets (NFAs) of BDL rose by $562.7M and the NFAs of commercial banks rose by $223.4M by May 2024.
Also, according to Lebanon’s consolidated commercial banks’ balance sheet, total assets declined annually by 9.48% to stand at $104.29B by May 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 78.36% of total assets; they dropped annually by 4.92% to settle at $81.72B in May 2024. Deposits with the central bank (BDL) represented 99.89% of total reserves, and decreased by 3.6% YOY, to reach $81.64B in May 2024. Furthermore, vault cash in Lebanese pound declined by 93.2% on a yearly basis to stand at $86.46M by the same period. The drop is attributed to the calculation based on the new official exchange rate of LBP 89,500 per USD. Claims on resident customers, constituting 5.56% of total assets, shrank considerably by 30.14%, to stand at $5.8B in May 2024. Moreover, resident securities portfolio, representing 4.51% of total assets, dropped by 32.63% in May 2024 to stand at $4.71B. More specifically, the Eurobond holding recorded a decline of 19.72% since May 2023, to reach $2.22B (net of provisions) by end of May 2024. Additionally, claims on non-resident financial sector grew by 4.68% YOY to stand at $4.42B by May 2024.
According to the data published by the Association of Lebanese Banks’ (ABL), the total number of cleared checks in the Lebanese financial system decreased remarkably from 231,909 checks by May 2023 to 92,687 checks by May 2024. However, the cumulative value of cleared checks in local currency increased from LBP 22,667B by May 2023 to LBP 32,076B by May 2024. This upsurge in value of Lebanese checks reflects a larger percentage of discounting Lebanese checks in the market. However, the cumulative value of cleared checks in foreign currency dropped from $1,943M by May 2023 to $681M by May 2024. Moreover, the volumes of cleared checks in Lebanese Pounds and foreign currencies witnessed substantial yearly drop of 51.51% and 84.35% respectively to settle at 83,274 and 9,413 checks, by May 2024. Accordingly, the dollarization rate of checks in terms of volume fell from 25.94% in May 2023 to 10.16% in May 2024. Notably, the number of returned checks dropped substantially by 75.23% YOY to stand at 507 checks. Moreover, the value of returned checks in foreign currency decreased by 80.83% by May 2024 to reach $21.47M; additionally, the value of returned checks in local currency decreased by 59.56% YOY to reach LBP 182B in May 2024. On a monthly basis, a total number of 2,557 fresh checks were issued in May 2024, surpassing the previous month’s figure of 1,915. Notably, the total number of fresh checks is increasing on monthly basis since the introduction of this new clearing system, revealing that there is a growing demand for fresh checks among businesses.
Furthermore, according to the data from the Orders of Engineers in Beirut and Tripoli, the total construction permits witnessed a year-on-year (YOY) decrease of 4.74% to reach 4,821 permits by June 2024 due to several reasons such as public institution’s strike, decrease in the purchasing power of most of Lebanese population in addition to the ongoing security concerns in the southern border and the war in Gaza. However, the Construction Area Authorized by Permits (CAP) increased by 26.75% to record 2,583,763 square meters (sqm). This could be explained by the increased tendency for group projects rather than individual projects. Moreover, construction activity witnessed a significant reduction regionally compared to last year. Across the governorates, Mount Lebanon grasped 35.95% of total permits, and accounted for 1,733 permits in June 2024 compared to 1,963 in June 2023. Regarding South governorate, it came second and represented 25.37% of total permits; its number of permits recorded 1,223 permits compared to 1,425 in June 2023. In Nabatieh, 786 permits were registered in June 2024, representing 16.3% of total permits, compared to 943 permits in the previous year. Furthermore, Bekaa governorate followed with 684 permits and representing 14.19% of total permits in June 2024, compared to 455 permits in June 2023. Beirut governorate’s share of permits was 4.69% with 226 permits only compared to 151 permits in June 2023.
Additionally, according to Cadastre, to the data from the General Directorate of Land Registry and Cadastre (LRC), the cumulative number of real estate (RE) transactions reached 12,950 valued at $1.64B by May 2024, calculated at the new official rate of USD/LBP 89,500 starting February 1st, 2024. On a monthly basis, the number of RE transactions stood at 3,589 in the month of May 2024, compared to 2,718 transactions in April 2024 and 793 transactions in May 2023. In details, North region holds the biggest share of real estate transactions at 900, or 25% of total RE transactions, followed by Zahle at 792 transactions or 22% of total RE transactions. Furthermore, South region grasped 20% of total RE activity in May 2024 while Beirut held 347 transactions or 10%. Noting that no RE transaction was recorded in the area of Metn for the month of May 2024. Moreover, the value of real estate transaction reached $253.39M in May 2024 out of which Beirut grasped the lion’s share of the total value, equivalent of 37% and worth $93M, while Keserwan followed, constituting 18% of the total and worth $46M.
In conclusion, the Purchasing Managers’ Index (PMI) for this period exhibited a marginal increase, reaching 48.3 in July up from 47.8 in June 2024, thus reflecting some positive momentum. However, it remains entrenched below the 50 threshold, indicating ongoing contraction in the economy. This slight rise can be partially attributed to the summer season, which is typically characterized by heightened economic activity due to increased tourism and consumer spending.
Despite this seasonal boost, the economic environment continues to face significant challenges. The prolonged conflict at the Lebanese southern border has created a climate of uncertainty, impacting investor confidence and disrupting supply chains. These factors have collectively dampened the potential for a more substantial recovery. The persistence of these geopolitical tensions is a major concern, as they contribute to an unstable business environment and impede growth. Consequently, while there are pockets of resilience within the economy, the overall outlook remains cautious. Businesses and policymakers must navigate these complex dynamics carefully so to foster a more conducive environment for sustainable economic improvement.
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