Lebanon’s private sector economy continued to contract in January, with business conditions deteriorating the most in five months, amid a slump in output and new orders.
The BLOM Lebanon PMI index, that measures the strength of the country's private sector economy, dropped to 41 in January, from 43.2 in December. A reading below the neutral 50 points to a contraction.
The rate of decline was the strongest since the Beirut port explosion in August 2020 and among the fastest since the survey data collection began in May 2013.
"It was really no surprise that the beginning of year 2021 has picked up where the year 2020 has ended," Fadi Osseiran, general manager of Blominvest Bank, said. "What especially marked the January 2021 PMI was the deterioration in output, new orders and export orders, and higher inflation."
Lebanon is facing its worst political and economic crisis in three decades, made worse by the rapid spread of Covid-19 in the country. The Lebanese pound has lost more than 80 per cent of its value against the US dollar, inflation, unemployment and poverty are on the rise.
An explosion at the Port of Beirut in August, which killed more than 200 people and devastated large parts of the capital, deepened the economic crisis. Talks with the International Monetary Fund for a $10 billion bailout package have stalled due to the absence of a cabinet and political bickering.
Businesses surveyed cited the latest downturn on pandemic-related restrictions that curtailed operating capacities. Latest data also signalled a further deterioration in demand conditions faced by private sector firms.
New orders fell at the quickest rate since August, partially driven by weaker international orders as foreign sales continued to decline.
Businesses, also continued to cut their staff numbers in January amid a demand slump. The decrease extended the current run that began in September 2019.
"What casts the darkest shadow on business conditions is the absence so far of any government action to deal with the country’s deepening economic crisis," Mr Osseiran said.