Lebanon's business conditions continue to deteriorate as March 9 deadline looms

Business sentiment in the country has hit a record low as the government struggles to implement reforms

epa08220116 Anti-government protesters shout slogans as they hold up placards with slogans such as 'No Trust' in central Beirut, Lebanon, 15 February 2020. The demonstrators gathered in the downtown area of the Lebanese capital after marching down several neighborhoods in a protest rejecting the new government recently formed by Prime Minister Hassan Diab.  EPA/NABIL MOUNZER
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Lebanon’s business environment continued to deteriorate in February with new orders and employment falling as the country grapples with economic uncertainty and a March 9 deadline to repay $1.2 billion (Dh4.4bn) of maturity eurobonds.

The Blom Lebanon PMI index, a composite measure of business conditions in the private sector compiled by IHS Markit, improved slightly to 45.4 in February from 44.9 the previous month, staying below the 50 mark that separates economic expansion from contraction.

Contributing to another subdued month was a further contraction in private sector output. The pace of reduction remained little changed from January. Those polled said cited political instability among the prime reasons for the decline, according to the survey.

New orders placed with Lebanese businesses also fell last month, extending the current sequence of reduction that began in June 2013.

Sentiment towards the 12-month business outlook fell to the weakest level in survey history, eclipsing the previous low registered in May 2017. Anecdotal evidence suggests negativity was driven by expectations for a prolonged political and economic instability, according to the survey.

“Most of the indices – especially output, new orders, new export orders, and employment - fell at a slower rate, perhaps stimulated by the formation of the new government and the diminution in the intensity of the uprising and street protests,” Ali Bolbol, chief economist of Blom Bank, said.

“Most crucially, future expectations are at their lowest level in survey history, something that can only be reversed if the new government implements meaningfully and soon a structural reform and economic recovery plan.”

Lebanon is experiencing its worst economic crisis since the end of a 15-year civil war in 1990, which gave rise to an unprecedented wave of public protests.

The country has one of the highest debt-to-gross domestic product ratios (166 per cent) in the world, according to the Institute of International Finance (IIF). Its public debt increased 7.6 per cent to $91.64bn year-on-year as of the end of December 2019.