Business conditions in Lebanon’s private sector fell to a seven-month low in August from a 10-year high in July, as output and new orders declined.
The downturn follows two consecutive months of the headline survey being in expansionary territory as the country endures its worst economic crisis since its independence.
Lebanon's Blom purchasing managers’ index, a measure of the strength of the country’s private sector economy, fell to 48.7 in August from 50.3 in July, sliding into contraction territory.
The contraction was the fastest in six months, dragged down by challenging domestic conditions that dented output volumes.
A reading above 50 indicates an expansion in business conditions, while one below represents a contraction.
"This contraction was precipitated by a simultaneous decrease in output and new orders, while employment stabilised," said Stephanie Aoun, research analyst at Blominvest Bank
"The Lebanese economy heavily relied on tourism and expats activity and it seems that in August 2023, there was a drop in summer engagement activity."
Softer demand drove business activity lower in August, marking the first contraction in new orders for three months, with the decline of a similar strength to that seen for output.
New work intakes were adversely affected by political and economic uncertainty, with new export business declining for the first time since March.
Lebanon has been without a president since the end of October 2022, when the six-year term of Michel Aoun ended. It is being run by a caretaker cabinet led by Prime Minister Najib Mikati, with limited powers.
The election of a president requires the consensus of the country's political elite.
Political vacuums have stalled Lebanon's economic progress and the existing one is salient because it threatens the enactment of reforms deemed necessary for the nation to emerge from its worst financial crisis.
"As the Lebanese economy navigates these turbulent waters, it's concerning to note that the absence of substantial economic reforms continues to cast a shadow," said Ms Aoun.
"Without meaningful changes, Lebanon's trajectory remains uncertain, underscoring the pressing need for impactful reforms to steer the nation towards a more promising economic future.”
The World Bank has dubbed Lebanon's economic meltdown as among the world's worst since the 1850s.
PMI survey respondents cited exchange rate fluctuations that drove input costs higher, prompting businesses to lift their charges. The Lebanese pound has lost more than 90 per cent of its value and inflation has soared after the central bank devalued the currency in February.
The official exchange rate changed to 15,000 pounds to the US dollar, compared with the peg in place since 1997 of 1,507.50 to the dollar.
Despite the decline in the PMI index, the survey found there was "a marked improvement in business sentiment in August as firms became less pessimistic in their assessment of year-ahead prospects for business activity". The survey's Future Output Index rose to its highest level since March 2020.
Tomorrow 2021
The burning issue
The internal combustion engine is facing a watershed moment – major manufacturer Volvo is to stop producing petroleum-powered vehicles by 2021 and countries in Europe, including the UK, have vowed to ban their sale before 2040. The National takes a look at the story of one of the most successful technologies of the last 100 years and how it has impacted life in the UAE.
Read part four: an affection for classic cars lives on
Read part three: the age of the electric vehicle begins
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IF YOU GO
The flights
FlyDubai flies direct from Dubai to Skopje in five hours from Dh1,314 return including taxes. Hourly buses from Skopje to Ohrid take three hours.
The tours
English-speaking guided tours of Ohrid town and the surrounding area are organised by Cultura 365; these cost €90 (Dh386) for a one-day trip including driver and guide and €100 a day (Dh429) for two people.
The hotels
Villa St Sofija in the old town of Ohrid, twin room from $54 (Dh198) a night.
St Naum Monastery, on the lake 30km south of Ohrid town, has updated its pilgrims' quarters into a modern 3-star hotel, with rooms overlooking the monastery courtyard and lake. Double room from $60 (Dh 220) a night.
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A comparison of sending Dh20,000 from the UAE using two different routes at the same time - the first direct from a UAE bank to a bank in Germany, and the second from the same UAE bank via an online platform to Germany - found key differences in cost and speed. The transfers were both initiated on January 30.
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Total cost: Dh567.25 - around 2.9 per cent of the total amount
Total received: €4,670.30
Route 2: online platform
The UAE bank’s charge for sending Dh20,000 to a UK dirham-denominated account was Dh2.10. The exchange rate margin cost was Dh60, plus a Dh12 fee.
Total cost: Dh74.10, around 0.4 per cent of the transaction
Total received: €4,756
The UAE bank transfer was far quicker – around two to three working days, while the online platform took around four to five days, but was considerably cheaper. In the online platform transfer, the funds were also exposed to currency risk during the period it took for them to arrive.
