World Economy

Lebanon Private Sector Business Improves Slightly

Weak demand continues to be the main impediment to progress.Weak demand continues to be the main impediment to progress.

Lebanon’s private sector business activity recovered slightly last month from the 21-month low reached in July, but was still at the second-lowest level since October 2016, according to a new survey.

The Blom Purchasing Managers’ Index increased to 45.6 last month from 45.4 in July. A reading above 50 signals expansion and below 50 a contraction. The survey of the companies released on Wednesday is sponsored by Blominvest Bank and compiled by IHS Markit, Arabian Business reported.

“Weak demand continues to be the main impediment to progress in Lebanon’s private sector economy,” said Fadi Osseiran, general manager of Blominvest Bank. “However, in what is otherwise a grim picture, the decline in staff numbers and the pessimistic outlook of surveyed companies have eased as compared to previous months.”

Lebanon, which is saddled with the Middle East and North African region’s highest debt-to-GDP ratio of about 150%, is struggling to boost growth and control its finances amid political wrangling over the formation of a new government and hosting of over one million Syrian refugees.

Prime minister-designate Saad Hariri has been appointed to form a government following the May parliamentary elections—the first to be held since 2009—and has emphasized the importance of proceeding with long-delayed economic reforms.

“Looking ahead, it is of utmost importance to swiftly form a government in order to prevent any snow-ball effect in Lebanon’s economic problems,” said Osseiran.

Lebanon’s debt-to-GDP ratio could balloon to 180% by 2023 if the government does not undertake reforms to narrow its fiscal deficit, which may reach 10% of GDP amid the current geopolitical tensions, the IMF said in February.

“We are looking forward to seeing a new government,” said Jihad Azour, the IMF’s director of the Middle East and Central Asia, in July.

“We consider that confidence and stability are to be achieved by accelerating the reforms, by pursuing fiscal adjustment and by reforming the key structures that are currently impeding the Lebanese economy from growing and increasing the burden on public finance,” he said.

“August also saw the level of exports sales drop further, albeit at the slowest rate for three months,” the survey showed. “Accordingly, the output of goods and services in the private sector decreased during August. The rate of contraction was identical to the sharp pace observed in July, which had been the quickest seen since October 2016.”

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