|05 September, 2019

Lebanon's private sector witnesses further decline in August

The BLOM Lebanon PMI registered at 47.8 in August, little-changed from 47.7 in July

Image used for illustrative purpose. A Lebanese trader monitors the market at the Byblos bank dealing room in Beirut October 13, 2008.

Image used for illustrative purpose. A Lebanese trader monitors the market at the Byblos bank dealing room in Beirut October 13, 2008.

REUTERS/ Jamal Saidi

BEIRUT: Lebanon’s private sector experienced further decline in its performance in the month of August 2019, according to BLOMINVEST PMI report Wednesday. “The BLOM Lebanon PMI registered at 47.8 in August, little-changed from 47.7 in July. The result represented a further deterioration in operating conditions, but one that was the slowest since January 2016,” the report said.

It added that despite the softer decline in total new orders, international sales fell at the fastest pace for five months.

“That said, the decrease was modest overall and softer than the series average. Meanwhile, staff numbers at private sector firms in Lebanon were unchanged in the middle of the third quarter. The result ended a 17-month sequence of workforce contraction,” BLOMINVEST said.

But the report noted that the companies continued to reduce their purchasing activity, albeit at the joint-softest rate since January last year.

“Capacity pressures in Lebanon’s private sector eased further in August, with volumes of outstanding business contracting for the fiftieth month in a row,” the report said.

Commenting on the August 2019 PMI results, Marwan Mikhael, head of Research at BLOMINVEST Bank, said: “The tourism sector was able to give some breathing space for the country, thus stabilizing the PMI at 47.8 in August, its highest level since January 2016. Hence economic growth averaged 0 percent-0.5 percent in the first eight months of the year. Nonetheless investors’ confidence remains very low with Credit Default Swap reaching 1,200 basis points before the recent downgrade by Fitch Ratings.”

“The only way out of this vicious cycle of stagnation, high public debt, and low confidence is for the government to accelerate the pace of structural reforms and finish the 2020 budget on time, including all the necessary tough measures in it in order to reduce the deficit and unlock CEDRE funds,” Mikhael said.

The report said that new orders placed with Lebanese private sector companies fell further in August, extending the current sequence of contraction that began in June 2013.

“That said, the rate of deterioration decelerated to the slowest for just over two-and-a-half years. Many survey participants mentioned weak demand conditions,” BLOMINVEST said.

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