The PMI slightly improved from 46.3 points in March to 46.7 points in April 2019, which translated into a softer deterioration in the operating environment of private sector businesses in Lebanon over the period. Hence, Lebanon’s economic growth implied from the PMI stood at an average of 1.3% by Apr. 2019 compared to 1.4% by Apr. last year.
The month of April thrust Lebanon’s macroeconomic parameters centre-stage. Anticipation was already ripe regarding the cabinet’s approval of the 2019 budget which also entailed a set of multifaceted national reforms. While the approval of the plan to reform Lebanon’s dysfunctional electricity sector early-on in April was not sufficient to lift up the private sector’s pessimism on future growth, the reduction of the state’s fiscal deficit became the most pressing reform to accelerate access to the soft loans pledged at the CEDRE donor conference.
In figures, the country’s debt burden stood at $85.2B by Feb. 2019 i.e. approximately 148% of GDP. In turn, Lebanon’s fiscal deficit composing 10% of GDP totaled $5.8B by Nov. 2018 according to the latest statistics provided by the Ministry of Finance. It is crucial to highlight that Lebanon’s balance of payments (BOP) in Q1 2019 showed a substantial $2 billion worth of transactions flew out of the country, compared to a lower BOP deficit of $198.2 million recorded by March 2018. In details, the net foreign assets (NFAs) of BDL and the Lebanese commercial banks slipped by $1.1 billion and $899 million, respectively, in Q1 2019. In their turn, total Private sector deposits by the end of March reached $172.1 billion, up by a monthly 0.10% in March 2019.
On a different note, despite the marginal uptick registered in overall input costs in April, pressures weighed down on the private sector activity as companies had to reduce output prices in order to survive the competitive pressures and the rising average inflation that reached 3.5% in Q1 2019. Several other macroeconomic indicators also pointed to slower business activity, in-line with the PMI’s readings. The value of cleared checks dropped from $16.82 billion in Q1 2018 to $14.82 billion in Q1 2019 according to data from the Association of Banks in Lebanon (ABL). The value of returned checks also grew by an annual 2.18% to $372 million. Moreover, the number of new registered passenger and commercial cars registered fell from 8,136 cars in Q1 2018 to 6,311 cars in Q1 2019. In addition, the real estate sector also witnessed a slowdown in the first quarter of the year. As such, data from the General Directorate of Land Registry and Cadastre (LRC) revealed the number of real estate (RE) transactions stood at 12,067 transactions by March 2019, down from 14,181 in Q1 2018. In its turn, the value of total RE transactions stood at $1.62B, also contracting by 19.21% year-on-year.
The pressure grew nationally and internationally on Lebanon to bring the aggressive reform agenda to fruition, yet this environment of ‘wait-and-see’ created by ongoing parliamentary meetings and budget revisions capped the PMI below the 50 mark in April 2019.