Lebanon’s Private Sector Continue to Show Weakness in May

Published June 10th, 2019 - 07:50 GMT
Most of the indicators show a steep decline when compared to last year except for tourism where hotel occupancy rate in March recorded 79 percent, a never seen before, at least since 2007.”
Most of the indicators show a steep decline when compared to last year except for tourism where hotel occupancy rate in March recorded 79 percent, a never seen before, at least since 2007. (Shutterstock)
Highlights
The rate of decrease accelerated from April and was historically marked.

Lebanon’s private sector continued to show more signs of weakness in the month of May despite the improvement in the tourism season, according to BLOM PMI report Friday. 


“At 46.3 in May, the BLOM Lebanon PMI fell from 46.7 in April. The latest reading pointed a continued deterioration in Lebanese private sector operating conditions, with the rate of decline accelerating slightly from April,” BLOMINVEST Bank said.

It added that the faster deterioration was partly driven by the sharpest fall in output at private sector firms for five months. Survey respondents continued to cite a lack of political and economic stability when explaining the latest contraction.

“New orders received by businesses in Lebanon continued to decline in May, extending the current sequence of contraction to six years. Moreover, the rate of decrease accelerated from April and was historically marked. Anecdotal evidence suggested that demand conditions remained weak.” The report said that contributing to the further fall in new business was another deterioration in international sales.

“Moreover, after the slowest reduction in new export orders for 11 months during April, the pace of contraction accelerated in May. Firms were again pessimistic toward the business outlook midway through the second quarter. Moreover, amid expectations for continued instability, confidence levels reached a 10-month low. There were no panel members anticipating a rise in output over the coming year, compared to 26 percent predicting a contraction,” the report said.

Commenting on the PMI results, Marwan Mikhael, head of research at BLOMINVEST Bank, said: “There is no doubt that the economy kicked off the year on a downturn with economic growth remaining in the range of 1.3-1.5 percent. Most of the indicators show a steep decline when compared to last year except for tourism where hotel occupancy rate in March recorded 79 percent, a never seen before, at least since 2007.”

He added that another positive development is the recent government approval of a draft budget that contains several reforms and is expected to release donors’ funds pledged during the CEDRE conference. “Hope is that this will gradually restore investors’ confidence and boost economic growth,” the report said.

The PMI is a composite index, calculated as a weighted average of five individual sub-components: New Orders (30 percent ), Output (25 percent ), Employment (20 percent ), Suppliers’ Delivery Times (15 percent ) and Stocks of Purchases (10 percent ). Readings above 50 signal an improvement in business conditions on the previous month, while readings below 50 show a deterioration.


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