Already in a slump, Lebanon’s economy continues to deteriorate

Business outlook remains 'deep in negative territory' amid political squabbles and mismanagement of economy

A picture taken with a drone shows empty roads during nationwide Covid-19 coronavirus pandemic lockdown at the Ramlet al-Bayda seaside in Beirut. EPA

Lebanon’s economy, already experiencing its worst slump since independence in 1943, continued to deteriorate in November as the government introduced new lockdown measures to prevent the spread of the coronavirus pandemic.

The Blom Lebanon PMI index, a measure of the strength of the country's private sector, fell to 42.4 last month from 43.3 in October. A reading above 50 denotes economic expansion and one below 50 represents a contraction.

The latest reading “confirms yet again what the Lebanese economy has been going through since at least a year, made worse by the latest Covid-19 lockdown, that is, severe declines in income, production and business expectations”, Fadi Osseiran, general manager of BlomInvest Bank said.

In mid-November, Lebanon ordered a full lockdown for two weeks to stem a resurgence of infections and reduce pressure on hospitals. As of Thursday, the country had more than 131,000 infections, over 83,000 recoveries and 1,055 deaths, according to Worldometer, which tracks the pandemic.

Mr Osseiran echoed local popular sentiment in the country towards the ruling political elite and criticism that came from the World Bank this week, which said the country was in a "deliberate depression".

“What is truly surprising is how decision makers have let the economy to free fall without taking any corrective actions to the contrary, allowing it to painfully and irresponsibly adjust on its own. This has hardly happened in any country of the world today,” Mr Osseiran said.

November's data pointed to a marked reduction in new orders received by Lebanese businesses, with the rate of contraction being “far stronger” than the historical average and among the quickest in the last seven and half years ago, as clients were hesitant to place orders amid Covid-19 uncertainty.

Lebanon also faces a liquidity crisis and a shortage of foreign currency. Inflation has soared to 137 per cent in October while its currency has lost 80 per cent of its value against the US dollar in the black market.

Businesses continued to reduce their staff numbers in November amid deteriorating demand conditions, according to the survey. Input delivery times continued to lengthen due to supply disruptions caused by the pandemic.

On the cost front, input prices faced by Lebanese businesses rose further, extending the current sequence of inflation that began in March 2019. The latest increase was the quickest for four months and "solid overall".

“Sentiment towards the one-year business outlook remained deep in negative territory during November,” the survey said. “The degree of pessimism was among the most severe since the survey's inception in May 2013.”

On Wednesday, France held a virtual conference to try and raise humanitarian assistance for the country.

A $10 billion bailout package from the International Monetary Fund that Lebanon asked for in May, and another $11bn in pledges by international donors in 2018 depends on the implementation of structural reforms.

Talks with the IMF have stalled due to political squabbling among the country's governing class. Lebanon's economy is forecast to shrink as much as 25 per cent this year, according to the IMF while the World Bank forecasts a 19.2 per cent contraction.