The month of May witnessed a notable improvement at the level of PMI, as it recorded a 76-month high on the fifth month of this year. In details, Lebanon PMI recorded 48.6 in May, up from 47.9 in April, and the highest score since January 2016. Although the PMI is still under 50, which means that the Lebanese economy is still in surgery, and the government needs to take instant actions in order to stop the collapse that started on October 2019.
Accordingly, Lebanon’s monthly inflation rate registered a high of 222.88% by April 2022 up from 110.24% in April 2021. In details, the cost of “Housing and utilities”, inclusive of water, electricity, gas and other fuels (grasping 28.5% of the CPI) added a yearly 115.73% by April 2022. Also, “Owner-occupied” rental costs increased by 17.43% year-on-year (YOY) and the average prices of “water, electricity, gas, and other fuels” followed a significant increase by 397.92% YOY. In fact, in April 2021, gas and other fuels were still subsidized by BDL, whereas in April 2022, BDL had officially ended the fuel subsidy thus rising fuel prices sharply. In addition, Lebanon’s fuel crisis worsened with Russia’s invasion on Ukraine, putting increasing pressure on fuel prices.
Real estate transactions witnessed an annual jump of 110.45% to reach 27,741 transactions by the month of March 2022. In its turn, the value of total RE transactions stood at $3.8B by March 2022, compared to $2.3B in the same period last year, up by 67.80%.
As for airport passengers, the activity at Rafic Hariri International Airport improved in the fourth month of the year 2022 to reach 1,501,997 passengers by April 2022, up by 96.18% from April 2021. Total arrivals added 112.96% year-on-year (YOY) to stand at 730,069 passengers by April 2022. The number of departing passengers climbed by a yearly 89.54% to reach 762,131 over the same period.
In terms of the balance sheet of Banque du Liban (BDL), the central bank’s total assets added 8.01% compared to last year, to reach $170.23B by the end of May 2022. The increase was mainly due to the 34.25% year-on-year (YOY) rise in other assets, grasping 40.69% of BDL’s total assets and reaching $69.27B by end of May 2022. In the same context, the gold account, representing 10.04% of BDL’s total assets, recorded a decline of 2.80% YOY to reach $17.08B by the end of May 2022. BDL’s foreign assets which grasp 9.41% of total assets recorded a decrease of 24.09% YOY to stand at $16.01B by end of May 2022. In more details, BDL’s foreign assets dropped by 10.15% since year start with $43.11M drop in the last two weeks by end of May 2022. Meanwhile, total volume of dollars injected into the market through Sayrafa platform amounted to $5.17B YTD and $683M for the last 2 weeks.
The data published by the association of Lebanese Banks’ showed that the total number of cleared checks in the Lebanese financial system slumped from 1.2M checks by April 2021 to 732,712 checks by April 2022. Moreover, the value of total cleared checks decreased yearly by 17.96% to reach $11.34B for the fourth month of 2022. In details, the value of checks in LBP increased remarkably from $5.87B in April 2021 to reach $7.27B in April 2022, while value of checks in foreign currencies decreased significantly by 49% year on year (YOY) to reach $4.07B by April 2022. Accordingly, the dollarization of cleared checks in terms of value significantly declined in April 2022, to settle at 35.88%, instead of 57.54% in April 2021. In the same token, the dollarization rate of checks in terms of volume fell in April 2022, to reach 49.21% instead of 55.14% in April 2021.
Moreover, data released by the Ministry of Finance (MoF) recently indicated that Lebanon’s gross public debt hit $99.98B in February 2022, thereby recording an annual increase of 3.2%. The rise is mainly attributed to the annual increase in both local and foreign currency debt by 0.81% and 7.3%, respectively. As such, domestic debt constituted 60.88% of the total public debt.
It is worth noting that BOP recorded a deficit of $1.70B by April 2022, compared to a deficit of $1.39B over the same period last year. Accordingly, Net foreign Assets (NFAs) of BDL fell by $1.77B, while the NFAs of commercial banks added $76.3M by April 2022.
As for Lebanon’s consolidated commercial banks’ balance sheet, total assets decreased by 6.72%, and stood at $172.1B by April 2022. In more details, deposits in foreign currencies (75% of resident customers’ deposits) decreased remarkably by 7.87% YOY in April 2022, while deposits in LBP (25% of resident customers’ deposits) increased substantially by 7.96% in April 2022
PMI dropped further below the 50-threshold and stood at 48.6 in May 2022 amid the continuous economic crisis. In details, the PMI has increased from 47.9 in April to 48.6 in May. Despite being under 50, however, we can’t neglect that there was a notable improvement in the PMI for the month of May. What we can say about this increase is that despite the continuous deterioration of the national currency against the dollar, it may be, however, an interesting indicator that Lebanese citizens have resigned themselves to the fact that most of their products are priced in US dollar, which is “psychologically” facilitating the purchasing operations and increasing its volumes. That said, Lebanon could be entering a tough and unstable phase in its post-election period due to the heightened political uncertainty. What complicates matters is that reform plans are in a state of limbo, pending the formation of a new government. We only hope that this “grey period” does not stay long, given the severity of the economic situation.