Lebanon’s business conditions decline marginally despite higher export orders

Blom Lebanon PMI in April holds close to March's seven-month high

Shoppers at a tool stall in the Al Ahad market in Beirut. Lebanon's financial crisis is one of the world's worst since the 19th century. Bloomberg
Powered by automated translation

Business conditions in Lebanon’s private sector deteriorated marginally in April even as export orders and purchasing activity rose.

The country's Blom purchasing managers’ index, a measure of the strength of its private sector, fell to 49.5 in April, from March’s seven-month high of 49.7.

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

The reading “reflected in higher export orders, employment, quantity and stock of purchases, and — perhaps most important of all — relative business confidence. That is in addition to lower input and output price inflation due to a better and stable exchange rate”, Ali Bolbol, chief economist and head of research at Blom Bank, said.

Lebanon, in the grip of its worst economic crisis in decades, continues to suffer from hyperinflation, which hit an annual rate of 264 per cent in March amid soaring communication, alcoholic beverage and tobacco costs, as well as food, water and energy rates, the Central Administration of Statistics' Consumer Price Index showed.

“That is not to say, however, that the Lebanese economy has turned the corner, but it does show that it is slowly adjusting upwards from the low equilibrium of the previous crisis years. And only a credible and well-governed reform programme can move this adjustment faster and to a much higher equilibrium level.”

Lebanon's central bank devalued the pound in early February, with the official exchange rate changing to 15,000 to the US dollar, compared with the peg in place since 1997 of 1,507.50 to the dollar.

This led to a surge in consumer prices in March and the Lebanese pound trading in the parallel market at as much as 140,000 to the dollar earlier this month.

Lebanon's worst economic and financial crises has been exacerbated by a political impasse that has blocked the formation of a new government and the enactment of reforms required to unlock billions of dollars in aid from the International Monetary Fund and other international donors.

What does continued dollarisation mean for the Lebanese?

What does continued dollarisation mean for the Lebanese?

The latest survey showed a fall in business activity across the Lebanese private sector at the beginning of the second quarter. However, there was an uplift in new orders from abroad, while purchasing activity and employment levels also expanded, the survey results show.

There was also a marked slowdown in the rate of input cost inflation and firms decreased their prices charged in April for the first time since December 2019.

The level of incoming new work received by the private sector also fell marginally as new business orders from overseas markets increased for the first time since July 2021.

The backlog of work also rose for the first time since August 2022 on the back of new business from abroad.

Employment rose for the first time in three months and purchasing activity increased for the first time since July 2022.

“Looking ahead, while firms were still pessimistic overall, business confidence rose to a 37-month high as some companies hoped for more stable operating conditions domestically,” the report said.

Updated: May 04, 2023, 3:03 PM