Lebanon's business conditions hit seven-month low

A decrease in new orders drove the decline in the headline reading of the purchasing managers' index

The Lebanese parliament in Beirut. Legislators failed for the eighth time to elect a president and the political uncertainty has weighed on the economy. EPA

Business conditions in Lebanon’s private sector continued deteriorate in November, falling to a seven month low as new orders declined.

The Blom Lebanon Purchasing Managers’ Index reading dropped to 48.1 in November, from 49.1 in October, marking the fastest deterioration in private sector operating conditions in the country since April.

A reading above the neutral level of 50 indicates growth while one below it points to a contraction.

“It seems that the positive effects from a good summer season have fizzled out,” said Ali Bolbol, chief economist at Blominvest Bank.

“The Lebanese economy has lost steam as no internal economic forces are available to keep the summer momentum. Not surprisingly, all real indicators fell: output, new orders and new export orders. The feeble demand and decline in output even led to input and output prices rising at softer rates, despite the weaker exchange rates.”

Operating conditions faced by private sector companies continued to be challenging during November, with the business outlook remaining pessimistic due to uncertainty surrounding the domestic political and economic climate, according to the survey.

Lebanon, which is in the grip of its worst economic crisis in decades, continues to suffer from hyperinflation, which hit 158.5 per cent in October compared with the same month a year earlier.

The country's political elite are deadlocked over the formation of a government six months after parliamentary elections and have yet to elect a new president.

The country needs to enact a range of reforms to unlock a $3 billion bailout package from the International Monetary Fund, which hinges on the formation of a new government and the election of a new president.

The decrease in the headline index reading was due to a decline in new orders, which fell at their quickest pace in seven months. Lower new business intakes were linked to weak client purchasing power.

Overseas customers were deterred from placing orders due to domestic uncertainty, according to survey respondents. New export business fell to the greatest extent in about a year in November.

Meanwhile, cost-cutting efforts drove a decrease in purchasing activity, with surveyed companies citing lower input buying to challenging financial conditions.

Surveyed businesses remained downbeat on future prospects due to political uncertainty in the country.

“The reason for these dismal results is that the country is still on hold, waiting — like many instances before it — for something to happen, the election of a new president this time,” Mr Bolbol said.

“That said, we hope the upcoming holiday season will bring a short relief to the economy and, better still, a longer relief underpinned by positive political developments and credible agreements on economic reform and renewal.”