Lebanon's private sector continued to shrink in November, as output and new orders declined to a nine-month low owing to political and economic instability.
The Blom Lebanon PMI, which measures operating conditions in the country's private sector, fell to 46.1 in November, from 46.6 in October, remaining below the 50.0 mark that separates growth from contraction.
The country’s PMI “slipped to its lowest level in nine-months owing to multiple headwinds of domestic and regional developments”, said Aline Azzi, research analyst at Blom Bank. “The major events were highly political, but their impact is completely economic.”
Rapid deterioration of Lebanese-Gulf relations and the political bickering “following the clashes of Tayouneh [over an investigation into Beirut’s port blast last year] and the ongoing judicial crisis, all led to worsening in economic conditions”, she said.
Lebanon is suffering from one of the world's deepest economic depressions on record. An IMF bailout is widely regarded as the only way for the country to unlock desperately needed aid to help it emerge from its worst crisis in three decades. Lebanon defaulted on about $31 billion of Eurobonds in 2020. Its currency has lost more than 90 per cent of its value against the US dollar, leading to surging inflation, increased unemployment and poverty.
Companies' output slipped in November, signalling a sharp decline in business activity across the private sector, according to Blom Bank. There was also a steeper drop in new export orders linked to domestic economic and political stability, it said.
Companies cut jobs as demand reduced because of the current economic turmoil. Input costs also rose as the domestic currency weakened against the US dollar and “higher burdens were shared with clients, as firms hiked their selling charges in response”, the report said.
New export orders also dropped at a rate "that is the strongest since the start of the year. All that and yet the government is not taking responsibility for the most severe economic crisis in modern history", Ms Azzi said.
France and Saudi Arabia earlier this week assured Lebanon of their support during a call to the Lebanese prime minister by French President Emmanuel Macron and Crown Prince Mohammed bin Salman, cooling off a more than month-long dispute between the Gulf countries and Lebanon.
Kuwait, Saudi Arabia and Bahrain withdrew their representatives in Beirut and expelled Lebanon’s representation after Lebanese information minister George Kordahi made remarks on television in support of the Iran-backed Houthi rebels in Yemen.
Mr Kordahi, however, resigned last week in a move that is increasingly seen as a way to resolve the diplomatic spat between Lebanon and Saudi Arabia.
The outlook for business activity over the coming 12 months remained strongly negative with many survey respondents expecting "economic and political instability to create further challenges for their businesses", according to Blom Bank.
