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Business conditions in Lebanon continued to deteriorate in February, but at a slower rate, as its Purchasing Manager’s Index (PMI) rose by 0.4 to 47.5, still below the level which shows improvement in business conditions.
The BLOM PMI report for the month showed weak domestic purchasing power and cashflow issues, causing businesses to cut their purchasing of inputs.
Dr Ali Bolbol, chief economist and head of research, BLOM Bank, said there were signs of returning energy in the economy, but stopped short of saying the Lebanese economy had turned a corner.
He said: “Though the climate of business remains challenging, the resumption of government meetings coupled with the recent exchange rate appreciations have injected a bit of energy into the economy.
“It remains to be seen, however, whether this heightened activity can prove sustainable and push the PMI to 50 or higher, given the absence still of any reforms and an agreement with the IMF.
“Most likely, when these occur along with prolonged political stability, we can perhaps say then that the Lebanese economy has turned the corner.”
The index is now at its highest level for eight months, but still some way off 50.0, the level which indicates improvement.
The weaker decrease in private sector output coincided with a softer reduction in new business intakes midway through the first quarter.
Weak purchasing power among domestic customers and issues with liquidity weighed on demand conditions and some companies also associated the challenging conditions domestically with falling new export business, with international clients reportedly hesitant to place new orders.
Input purchasing fell over the month, although the rate of decline was the slowest seen across the current six-year period of contraction.
Despite efforts by firms to reduce their expenses, latest survey data pointed to sustained inflationary pressures, with companies saying inflation reflected the high cost of US dollars and rising commodity prices.
(Reporting by Imogen Lillywhite; editing by Seban Scaria)
