Lebanon’s private sector economy continued to contract in December, but at a softer pace, as weak demand and a sharp fall in output worsened business conditions in the country.
The BLOM Lebanon PMI index, that measures the strength of the private sector economy, rose to 43.2 last month, from 42.4 in November. A reading above the neutral 50 mark indicates economic expansion while one below points to a contraction.
“This [data] implies that business conditions for the private sector have declined at an accelerating pace in 2020. And so has private sector employment, an index that points towards further emigration and brain drain for Lebanon,” Ali Boblol, chief economist and head of research at Blom Bank, said.
Lebanon is facing its worst economic crisis since its independence after defaulting on about $31 billion of eurobonds. Its currency has lost more than 80 per cent of its value against the dollar on the black market. Talks with the International Monetary Fund for a $10 billion bailout package have stalled amid political bickering.
An explosion at the Port of Beirut in August, which killed more than 200 people and devastated large parts of the capital, has further compounded the country's economic woes.
The latest downturn in operating conditions was partially driven by a further contraction in output across the private sector as demand conditions “remained severely subdued due to the ongoing political and economic crisis in the country”, according to the survey.
New orders for private sector companies also fell at the end of the year.
The continued reduction in both output and new orders led to Lebanese business cutting staff numbers and the “rate of job shedding accelerated to the quickest since July”.
Firms also reduced their purchasing activity leading to a 14th successive monthly contraction in inventories.
“Perhaps putting an end to the senseless political deadlock over the formation of a functioning government will turn things around, as the country cannot afford the luxury of losing more time,” Mr Boblol, added.
Political stalemate continues in the country with prime minister-designate Saad Hariri yet to form a government.
The new wave of Covid-19 infections in the country has also dented business confidence. Lebanon will also force all non-essential businesses to close, and drastically reduce the number of passengers arriving by air, as part of a series of lockdown measures to combat the rising number of Covid-19 cases new wave of coronavirus cases starting Thursday.
