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Lebanon’s private sector saw its decline in business conditions slowing last month but confidence was still subdued amid political uncertainty and price volatility.
The country’s purchasing manager’s index (PMI) rose to a four month-high of 48.8 in February, with anything below 50.0 indicating a decline in business conditions, as private sector business activity and new orders fell at softer rates.
The index was at its highest level since October, and is up from 47.7 in January, and indicated a modest but slower deterioration in the health of Lebanon’s private sector economy, according to the new BLOM Lebanon PMI report.
Employment rose for the first time since July, albeit marginally and overall input costs rose at the fastest rate in over two-and-a-half years during February as respondents commented on adverse exchange rate movements against the US dollar.
Subsequently, selling charges rose at the second fastest pace on record as companies acted to protect their margins.
There was a market acceleration in overall input cost inflation, with operating expenses rising at the sharpest rate since June 2020 due to surging purchase costs.
“Output prices increased during February at the second-fastest pace since data collection began in May 2013,” the report said.
Price volatility directly affected supplier performance, according to firms, with average input lead times lengthened to the greatest extent since July 2021.
Dr Fadi Osseiran, general manager at BLOMINVEST Bank, said: “Lebanon seems to be stabilising as the latest PMI index improved noticeably, though still below the 50 threshold.”
He added: “It is obvious that cautious positivity is driving the index, but not for long as the short-term positivity is facilitating the better-than-expected demand.”
However, the problem remains political as the presidential vacuum, caused by a failure to elect a new president following the end of President Michel Aoun’s term at the end of October, is taking its toll on the state, economy, and most importantly, it is pressuring the banking sector, Osseiran said.
“These developments only prove the extent to which the Lebanese crisis is inherently political at its core, and the solution lies in a political settlement that paves the way to stabilise and grow the economy for the periods ahead,” he concluded.
(Reporting by Imogen Lillywhite; editing by Daniel Luiz)
