issue no. 664...he conomic r b s lebbaanonn news economic insights redit s&p places lebanon’s...

Issue No. 664

October 12 – November 1, 2019

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LLEEBBAANNOONN NEWS

ECONOMIC INSIGHTS

> S&P PLACES LEBANON’S RATINGS ON CREDITWATCH NEGATIVE 1

> THE IMF PROJECTS LEBANON’S ECONOMIC GROWTH AT 0.2% IN 2019 2

> THE IMF CONCLUDES 2019 ARTICLE IV CONSULTATION WITH LEBANON 3

> LEBANON RANKS 143RD IN THE WORLD IN THE 2020 EASE OF DOING

BUSINESS 4

> LEBANON EMERGES AS THE MOST EXPENSIVE DESTINATION FOR

RECEIVING $200 FROM GERMANY IN Q3-2019 5

> LEBANON RANKS 44TH IN THE WORLD IN EIU’S 2019 GLOBAL

MICROSCOPE INDEX 6

> OCCUPANCY RATE IN LEBANON’S HOSPITALITY SECTOR AT 75.4% IN

JULY 2019 7

> INDUSTRIAL EXPORTS UP BY 4.32% Y-O-Y BY JULY 2019 8

> BALANCE OF TRADE DEFICIT NARROWS TO $11.37 BILLION BY AUGUST

2019 9

> CONSTRUCTION PERMITS AREA AT 4.04 MILLION SQM BY SEPTEMBER

2019 10

> CEMENT DELIVERIES DOWN BY 29.83% Y-O-Y BY AUGUST 2019 11

> THE COINCIDENT INDICATOR DOWN BY 1.69% Y-O-Y IN AUGUST

2019 11

> BDL’S FOREIGN CURRENCY RESERVES REACH $34.53 BILLION AT END

OF OCTOBER 2019 12

> OPENED LETTERS OF CREDITS UP BY 1.19% Y-O-Y BY AUGUST 2019 13

> ANNUAL INFLATION IN LEBANON AT 1.09% IN SEPTEMBER 2019 14

> BSE TRADING VALUE AT $873 MILLION BY OCTOBER 2019 15

> BEIRUT PORT FREIGHT ACTIVITY DOWN BY 12.80% Y-O-Y BY

SEPTEMBER 2019 16

CORPORATE NEWS

> FITCH DOWNGRADES THE RATING OF BANK AUDI AND BYBLOS BANK TO

“CCC-” 17

> SOLIDERE GROUP REPORTS NET PROFIT OF $42 MILLION IN H1-2019 18

MONETARY PERFORMANCE

> MONETARY AGGREGATES 19

> MONEY MARKETS 19

LEBANON'S ECONOMIC & FINANCIAL SECTOR INDICATORS 20

LEBANON'S RATINGS 21

S&P PLACES LEBANON’S RATINGS ON

CREDITWATCH NEGATIVE

S&P Global Ratings placed Lebanon’s

sovereign ratings on “CreditWatch with

negative implications” and lowered its

transfer and convertibility assessment of

the country from “B+” to “B-”.

THE IMF PROJECTS LEBANON’S

ECONOMIC GROWTH AT 0.2% IN 2019

The IMF’s economic growth estimates for

Lebanon were downwardly revised to

0.2% for 2019 (down from a previous

estimate of 1.3%) and 0.9% for 2020

(down from 2.0% previously).

LEBANON RANKS 143RD IN THE WORLD

IN THE 2020 EASE OF DOING BUSINESS

The World Bank positioned Lebanon 143rd

out of 190 countries around the globe in

the 2020 Doing Business report, slipping

as such from the 142nd place it occupied a

year before.

LEBANON EMERGES AS THE MOST

EXPENSIVE DESTINATION FOR

RECEIVING $200 FROM GERMANY IN

Q3-2019

Lebanon emerged as the costliest

destination for sending $200 from

Germany, with said cost standing at

$21.95 (representing 10.98% of the total

amount transferred) in the third quarter

of 2019.

FITCH DOWNGRADES THE RATING OF

BANK AUDI AND BYBLOS BANK TO

“CCC-”

Fitch Ratings downgraded the long-term

Issuer Default Rating (IDR) of two

Lebanese banks, namely Bank Audi and

Byblos Bank, from “CCC” to “CCC-”, while

placing both banks on Rating Watch

Negative (RWN).

TABLE OF CONTENTS

Weekly Market Watch

ECONOMIC RESEARCH UNIT - ADLIEH, BEIRUT LEBANON - TEL: 01-608000 FAX: 01-608231

"ABL" Association of Banks in Lebanon "BDL" Banque Du Liban "BOP" Balance of Payment "BSE" Beirut Stock Exchange "CLASI" Credit Libanais Aggregate Stock Index

"CLFI" Credit Libanais Financial Sector Stock Index

"CLCI" Credit Libanais Construction Sector Stock Index "CPI" Consumer Price Index “EIU” Economist Intelligence Unit “EOY” End of Year "GDRs" Global Depositary Receipts "GDP" Gross Domestic Product "IMF" The International Monetary Fund "LBP" The Lebanese Pound "M1" Currency in Circulation + Demand

Deposits in LBP "M2" M1 + Other Deposits in LBP "M3" M2 + Deposits in Foreign Currencies "M4" M3+ Treasury Bills Held by Non-Banking System Including

Accrued Interests

"MENA" Middle East and North Africa

"MOF" The Lebanese Ministry of Finance

"Moody's" Moody's Investors Service "P/E" Price to Earnings Multiple "P/BV" Price to Book Multiple "PPI" Producer Price Index

"TEU" Twenty-Foot-Equivalent Unit

"USD" The United States Dollar "Y-O-Y" Year-on-Year "YTD" Year to Date "YTD Price Performance" Yield to Date Price Appreciation

“LE

“

SYNOPSIS OF TERMS

Weekly Market Watch

ECONOMIC RESEARCH UNIT - ADLIEH, BEIRUT LEBANON - TEL: 01-608000 FAX: 01-608231

S&P PLACES LEBANON’S RATINGS ON CREDITWATCH NEGATIVE

Standard & Poor’s (S&P) Global Ratings, the international rating agency, placed on October 25, 2019 Lebanon’s sovereign ratings on “CreditWatch with negative implications” and lowered its transfer and

convertibility (T&C) assessment of the country from “B+” to “B-”. This decision came in light of the recent social uprising and mirrors the swelling fiscal and monetary pressure that could emanate from receding foreign currency inflows to the country. More particularly, the agency considered that depositor confidence could be undermined by the prevailing uncertainties, which could in turn take a toll on foreign exchange reserves at

Banque Du Liban (BDL). These reserves should, however, remain ample enough to meet the government’s near-term financing needs (including maturing Eurobonds of $1.5 billion and coupon payments of $1.0 billion in November) and Lebanon’s current account deficit (expected to reach $13 billion by end of 2019), always according to the report. It is worth noting that S&P had projected the value of usable foreign currency reserves at BDL to reach around $19 billion by the end of the current year. It also mentioned the $2.3 billion hike in BDL’s “official” foreign currency reserves during the months of July and August and attributed said hike to the several rounds of financial engineering operations introduced by the Central Bank. The agency,

however, questioned the ability of any future financial engineering schemes to counter deposit outflows, which have already aggregated to about $2.1 billion during the first eight months of 2019, as well as the sustainability of such schemes given their increasing cost. In a related note, the report mentioned that a shortage of U.S. dollars was recently witnessed leading to several protests, following which BDL announced that it would be guaranteeing enough dollar supply for importers of hydrocarbons, medicine, and wheat

through commercial banks. It is worth highlighting, in this vein, that the deposit dollarization rate at banks has

neared its 2007 all-time high of 73%. From another standpoint, the report pointed to the emergence of a new challenge for authorities following the latest social uproar, making it harder to adopt reforms that aim at slashing the budget deficit while simultaneously preserving social stability. In fact, the raging protests prompted former PM Hariri to announce a new policy package that aims at reducing Lebanon’s fiscal deficit to 0.63% of GDP for the year 2020 through a large set of stringent actions, of which: slashing the salaries of current and previous ministers and deputies, halving debt-servicing costs by the Central Bank, and imposing a single-time tax of 2% on banks’ turnover. The policy package made sure to annul all tax adjustments that

were recently introduced and to include various structural measures such as accelerating the approval process for new power plants, introducing new legislations to combat corruption, and privatizing selected public institutions. The proper implementation of this package should fuel foreign currency inflows to the country while unlocking some of the pledged funds during the “CEDRE” conference. In the same vein, S&P underlined that despite the growing downside risks, the Lebanese government has always met its commitments on time even during the toughest of times. Gazing into the future, the agency projected Lebanon’s budget deficit to average 9.5% of GDP throughout the 2019-2022 period, with its gross public debt climbing to 157% of GDP

by end of 2022, compared to 140% in 2018 and 130% in 2019 (the 4th highest among S&P-rated sovereigns).

Rating action-wise, the agency announced that it would consider downgrading Lebanon’s sovereign ratings in the event the government failed to address the mounting economic and social pressures in a manner that reinstates depositor confidence, especially if accompanied by a weakening currency peg, jeopardizing the country’s ability to meet its debt requirements and external financing needs. On the other hand, the agency

unveiled that it would affirm the country’s sovereign ratings in the event the government succeeded at bolstering economic growth and taming public debt, which could be made possible by the implementation of the necessary reform agenda. It went on to claim that a positive rating action is even possible if sizeable donor funds were obtained from the international community in a manner that can attenuate the escalating fiscal pressure and strengthen confidence in the peg of the Lebanese pound. Either way, the agency specified that it should resolve the concerned CreditWatch within the upcoming three months.

In a similar context, S&P Global Ratings placed on October 28, 2019 the long and short-term ratings of three Lebanese banks, namely Bank Audi, BLOM Bank, and Bankmed, on “CreditWatch with negative implications”, in line with the sovereign. According to the report, this means that banks’ ratings could be downwardly revised

following a similar action on Lebanon’s sovereign rating, or in the event the concerned banks’ funding profile or liquidity position sharply deteriorate. Moreover, the agency spotted the light on the high “operational, funding, and asset exposure” of Lebanese banks to the local economy and the sovereign, with their sovereign exposure constituting around 69% of their assets and over 8x their core equity at end of May 2019. Banks’

placements with BDL also represented some 57% of their combined assets by end of July.

LEBANON NEWS

Weekly Market Watch

SOURCE: S&P GLOBAL RATINGS, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 1

THE IMF PROJECTS LEBANON’S ECONOMIC GROWTH AT 0.2% IN 2019

According to the International Monetary Fund’s October 2019 World Economic Outlook (WEO) report, the global economy is currently in a “synchronized slowdown” with growth expected to slow from 3.6% in 2018 to

a downwardly revised 3.0% in 2019, compared to a previous growth estimate of 3.3% in its April 2019 WEO report, its lowest level since the global financial crisis. The IMF attributed its downwardly revised growth figures for the global economy to the mounting trade barriers, rising uncertainties concerning trade and geopolitics, idiosyncratic factors resulting in macroeconomic pressures in several emerging market economies in addition to some structural factors such as low productivity growth and aging demographics in advanced economies. In this context, the IMF anticipated the rising trade tensions between the U.S. and China to reduce the global GDP growth by a cumulative 0.8% by the year 2020. In addition, the IMF commented that the

weak growth for the year 2019 is characterized by a slowdown in global trade and manufacturing with rising tariffs and uncertainties concerning trade policies hampering investments and demand for capital goods, and the automobile industry suffering from a contraction due to disruptions from new emission standards in China and Europe. In this vein, the IMF anticipated growth in advanced economies to deteriorate from 2.3% in 2018 to 1.7% in 2019. Delving further into details, the report projected real growth in 2019 to reach 2.4% in the United States, 1.2% in the Euro area, 1.2% in the United Kingdom, and 0.9% in Japan. Large emerging markets and developing nations were no exception, witnessing a downward revision in growth estimates for

the year 2019 due to uncertainties in their trade and domestic policies. Low-income developing economies, however, are expected to post a robust yet non-homogenous growth, with non-commodity exporters projected

to register a strong performance whilst commodity exporters are anticipated to post a dull performance. Overall, the report predicted growth in emerging markets and developing economies to decelerate from 4.5% in 2018 to 3.9% in 2019. On the longer run, and always according to the report, global economic growth is anticipated to improve boosted by a rebound in the performance of emerging market economies. The report,

however, expected growth to moderate beyond the year 2020 for the United States, the Euro Area, China and Japan which altogether account for some half of the global GDP. The IMF accordingly predicted world economic growth to reach 3.4% in 2020 and 3.6% by 2024, slipping to 1.7% then 1.6% for advanced economies while improving to 4.6% then 4.8% for emerging and developing countries.

On the regional front, the WEO report projected growth in the Middle East & Central Asia (MECA) region to ease from 1.9% in 2018 to 0.9% in 2019, before rebounding to 2.9% in 2020 and 3.3% by 2024. Growth forecasts for the MECA region were downwardly revised from 1.8% for 2019 and 3.3% for 2020 in the IMF’s April 2019 WEO report. These revisions mainly come in light of the tightening of U.S. sanctions on Iran coupled with a decline in oil-related GDP growth in Saudi Arabia as a result of a weaker production and demand levels.

Locally, the IMF’s economic growth estimates for Lebanon were downwardly revised to 0.2% for 2019 (down

from a previous estimate of 1.3% in its April 2019 WEO report) and 0.9% for 2020 (down from 2.0% previously). The IMF expected, however, Lebanon’s real GDP growth to accelerate to 2.7% by the year 2024. In parallel, it anticipated the country’s current account deficit to GDP ratio to widen from 25.6% in 2018 to 26.4% in 2019 and 26.3% in 2020, before narrowing to 23.1% by end of 2024. Furthermore, the IMF

projected the average annual inflation rate in Lebanon to recede to 3.1% in 2019 and 2.6% in 2020, from 6.1% in 2018.

LEBANON NEWS

Weekly Market Watch

SOURCE: IMF, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 2

2018 2019* 2020* 2024*

Lebanon 0.2 0.2 0.9 2.7

World 3.6 3.0 3.4 3.6

Advanced Economies 2.3 1.7 1.7 1.6

United States 2.9 2.4 2.1 1.6

Euro Area 1.9 1.2 1.4 1.3

Germany 1.5 0.5 1.2 1.2

France 1.7 1.2 1.3 1.4

Italy 0.9 0.0 0.5 0.6

Spain 2.6 2.2 1.8 1.6

Japan 0.8 0.9 0.5 0.5

United Kingdom 1.4 1.2 1.4 1.5

Canada 1.9 1.5 1.8 1.7

Emerging and Developing Economies 4.5 3.9 4.6 4.8

Emerging and Developing Europe 3.1 1.8 2.5 2.5

Russia 2.3 1.1 1.9 1.8

Emerging and Developing Asia 6.4 5.9 6.0 6.0

China 6.6 6.1 5.8 5.5

India 6.8 6.1 7.0 7.3

Middle East and Central Asia 1.9 0.9 2.9 3.3

Latin America and the Caribbean 1.0 0.2 1.8 2.7

Brazil 1.1 0.9 2.0 2.3

Mexico 2.0 0.4 1.3 2.4

Sub-Saharan Africa 3.2 3.2 3.6 4.2

Real GDP Growth (%)

* Projected Growth

Source: IM F, Credit Libanais Economic Research Unit

THE IMF CONCLUDES 2019 ARTICLE IV CONSULTATION WITH LEBANON

The International Monetary Fund (IMF) concluded on September 11 its Article IV Consultation based on the staff report that was prepared on August 21. In details, the report pointed out to a slowdown in Lebanon’s real

economic growth to 0.3% during the year 2018 with the slowdown projected to pursue its trend in 2019 dragged by the lackluster performance of most economic indicators. In figures, the report cited the 16% drop in the value of cleared checks and the 31% contraction in the number of construction permits during H1-2019,

with tourism activity being an exception, rising by 12% on an annual basis. The report revealed that the budget deficit worsened during the year 2018 to attain 11% of GDP, with the primary balance settling at a negative 1.4% of GDP, mainly as a result of the salary scale-related spending which turned out to be more expensive than previously anticipated. The IMF, however, pointed out that the Lebanese government that was formed in early 2019 has taken “important” steps aiming at boosting investor confidence such as the passing of the electricity sector reform plan and the approval of the year 2019 budget that targets a deficit of 7.6% of GDP. The government aims to achieve said target through a series of taxes and cost-cutting measures such as

raising the tax on interest income from 7% to 10%, imposing a 3% tax on some imported goods and implementing a freeze on public sector hiring and early retirement. As a result, expenditures contracted by an annual 28% by the month of April, although part of this reduction may be explained by the accumulation of arrears as per the report. Moreover, the IMF projects the budget deficit to attain a wider 9.6% of GDP in 2019, as opposed to the 7.6% target, based on some more conservative revenue assumptions. The report also highlighted Lebanon’s large current account deficit which stood at 25% of GDP in 2018, and which further

widened during the first five months of 2019, exerting additional external financing pressures, bearing in mind that deposit inflows have dropped despite the high-yielding financial operations conducted by BDL. Notwithstanding the bleak situation, the IMF revealed that some events might improve Lebanon’s medium-term outlook such as the possible return of refugees and the reconstruction of Syria once the situation is resolved, in addition to the potential discovery of a natural gas field in Lebanon’s territorial waters, bearing in mind that the exploration phase has already started.

In addition, the IMF issued recommendations to the Lebanese government on three main fronts namely fiscal consolidation, improvement of growth & export levels and monetary & financial stability. On the fiscal consolidation front, the IMF considered that sizeable and credible fiscal adjustments and structural reforms must be implemented in an attempt to maintain confidence, and that a primary surplus of 4-5% is required to reverse the upward path of the debt to GDP ratio. In this context, the IMF recommended raising the VAT and excise taxes as well as improving tax compliance, lauding in this context BDL’s recent decision for banks to only use Ministry of Finance approved financial statements used for tax filing purposes in the loan approval

process of credit assessment by banks. Always in the same vein, the IMF recommended eliminating electricity subsidies by adhering to the electricity sector reform plan as well as conducting a thorough review for

potential areas for expenditure saving in the public sector, citing the sizeable burden of the wage bill and pensions as a potential target. As far as growth enhancing reforms are concerned, the IMF recommended reducing the cost of doing business by accelerating the implementation of already approved laws (code of commerce and law on judicial intermediation) as well as the adoption of new laws related to closing a business

and bankruptcy. In addition, the IMF stressed on the need to pass a public procurement law and incorporating Council for Development and Reconstruction (CDR) spending in the budget, while calling for urgent steps aimed at reducing corruption levels such as enacting illicit enrichment and asset declaration legislation. Finally, and on the monetary policy and fiscal stability fronts, the IMF recommended a gradual reduction in BDL’s quasi-fiscal operations, advising in this regard against any potential BDL involvement in purchasing 1% interest rate treasury bills. The IMF also stressed on the importance of pursuing the strengthening of banks’ capital buffers by gradually aligning capital requirements on their holdings of BDL foreign currency

denominated instruments with Basel III requirements. Furthermore, the IMF called for increasing deposit insurance coverage levels. Always on the monetary policy and fiscal stability front, the IMF report revealed that the Lebanese authorities have strengthened the Anti Money Laundering (AML) and Combating the Financing of Terrorism (CFT) framework, and that the authorities must continue said improvements.

LEBANON NEWS

Weekly Market Watch

SOURCE: IMF, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 3

LEBANON RANKS 143RD IN THE WORLD IN THE 2020 EASE OF DOING BUSINESS

The World Bank Group recently released its “Doing Business 2020” report, a publication which assesses the

judicial and regulatory framework governing 10 aspects of the life of a business, namely “starting a business”,

“dealing with construction permits”, “getting electricity”, “registering property”, “getting credit”, “protecting minority investors”, “paying taxes”, “trading across borders”, “enforcing contracts”, and “resolving insolvency”. The report positioned Lebanon 143rd out of 190 countries around the globe for the year 2020, slipping as such from the 142nd place it occupied in the Doing Business 2019 report. Lebanon came right behind Nicaragua (global rank: 142), yet outperformed Cambodia (global rank: 144) by one position. Delving further into details, Lebanon occupied the 151st position in the world in terms of “starting a business”, noting

that 8 procedures and 15 days are required to start a business. As for “getting credit”, which revolves around assessing credit information systems and the legal rights of borrowers and lenders in collateral and bankruptcy laws, the report positioned Lebanon 132nd internationally, with a score of 6 in the depth of credit information index and a score of 2 in the strength of legal rights index. Lebanon reported an improvement in its rankings related to “protecting minority investors”, “dealing with construction permits”, and “enforcing contracts”, while maintaining the same position in terms of “resolving insolvency” and losing rank in the remaining five areas.

On a wider scale, New Zealand enjoyed the leading position in the world in terms of ease of doing business for the fourth consecutive year, leapfrogging Singapore and Hong Kong. On a regional basis, the United Arab Emirates outperformed its MENA peers in the World Bank’s Doing Business report for the year 2020 (global

rank: 16), followed by Bahrain (global rank: 43), Morocco (global rank: 53), and Saudi Arabia (global rank: 62), only to name a few. Lebanon ranked 13th among MENA countries in the Doing Business 2020 report, outperforming each of Algeria (global rank: 157), Iraq (global rank: 172), Syria (global rank: 176), Libya

(global rank: 186), and Yemen (global rank: 187).

LEBANON NEWS

Weekly Market Watch

SOURCE: WORLD BANK, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 4

Starting a business (Rank) 151 Trading across borders (Rank) 153 Registering property (Rank) 110

Procedures (number) 8 Time to export (hours) 144 Procedures (number) 8

Time (days) 15 Cost to export (USD) 580 Time (days) 37

Cost (% of income per capita) 42.3 Time to import (hours) 252 Cost (% of property value) 6.0

Minimum capital (% of income per capita) 41.5 Cost to import (USD) 925 Quality of land administration index (0-30) 16

Getting credit (Rank) 132 Paying taxes (Rank) 116

Strength of legal rights index (0-12) 2 Enforcing contracts (Rank) 131 Payments (number per year) 20

Depth of credit information index (0-8) 6 Time (days) 721 Time (hours per year) 181

Credit registry coverage (% of adults) 21.3 Cost (% of claim) 30.8 Total tax & contribution rate (% of profit) 32.2

Credit bureau coverage (% of adults) 0 Quality of judicial process index (0-18) 6.5 Postfiling index (0-100) 27.5

Getting electricity (Rank) 127

Procedures (number) 4 Protecting minority investors (Rank) 114 Resolving insolvency (Rank) 151

Time (days) 89 Extent of disclosure index (0-10) 9 Time (years) 3

Cost (% of income per capita) 128 Extent of director liability index (0-10) 1 Cost (% of estate) 15

Reliability of supply & transparency of tariffs index (0-8) 0 Ease of shareholder suits index (0-10) 5 Recovery rate (cents on the dollar) 30.8

Extent of shareholder rights index (0-10) 3 Strength of insolvency framework index (0-16) 4

Dealing with construction permits (Rank) 164 Extent of ownership and control index (0-10) 1

Procedures (number) 22 Extent of corporate transparency index (0-10) 3

Time (days) 276

Cost (% of warehouse value) 7.7

Building quality control index (0-15) 14

Source: World Bank Group, Credit Libanais Economic Research Unit

Country 2019 Rank 2020 Rank

New Zealand 1 1

Singapore 2 2

Hong Kong 4 3

United Arab Emirates 11 16

Bahrain 62 43

Morocco 60 53

Saudi Arabia 92 62

Oman 71 68

Jordan 104 75

Qatar 83 77

Tunisia 80 78

Kuwait 97 83

Egypt 120 114

West Bank and Gaza 116 117

Iran 128 127

Lebanon 142 143

Algeria 157 157

Iraq 171 172

Syria 179 176

Lybia 186 186

Yemen 187 187

Source: World Bank, Credit Libanais Economic Research Unit

Doing Business 2020

0 20 40 60 80 100 120 140 160 180 200

United Arab Emirates

Bahrain

Morocco

Saudi Arabia

Oman

Jordan

Qatar

Tunisia

Kuwait

Egypt

West Bank and Gaza

Iran

Lebanon

Algeria

Iraq

Syria

Lybia

Yemen

16

43

53

62

68

75

77

78

83

114

117

127

143

157

172

176

186

187

Global Rankings of MENA Countries in the Ease of Doing Business 2020


LEBANON EMERGES AS THE MOST EXPENSIVE DESTINATION FOR RECEIVING $200 FROM GERMANY IN Q3-

2019

The World Bank Group published its latest statistics on the cost of sending remittances from 48 source

countries and in 105 receiving countries. The cost includes, among others, transaction fees, the applicable exchange rate, and the speed of the service. According to these statistics, the cost of sending $200 from the United States to Lebanon stood at $18.79 in the third quarter of 2019, representing 9.40% of the total amount transferred, compared to $21.89 (i.e. 10.94% of the transferred amount) a quarter earlier. This

qualifies the USA-Lebanon corridor to be the second most expensive among all money corridors emanating from the United States. In a related note, the average cost of sending $500 from the United States to Lebanon dropped to $27.33 (5.47%) in the third quarter of 2019, down from $27.85 (5.57%) in the previous quarter. Conversely, the World Bank statistics revealed that the cost of sending $200 from Canada and Australia increased to $20.87 (10.43%) and $24.60 (12.30%) respectively in Q3-2019. As far as European countries are concerned, the cost of sending $200 from the United Kingdom, Sweden and France to Lebanon rose to $23.40 (11.70% of the transferred amount) in Q3-2019, $18.80 (9.40%) and $17.28 (8.64%) on a respective

basis, with the cost of sending $500 from the United Kingdom and France also increasing to $37.88 and $34.77 respectively. The cost of sending $200 and $500 from Germany to Lebanon, however, dropped to $21.95 (10.98%) and $34.29 (6.86%) respectively. It is worth noting that Lebanon emerged as the costliest destination for sending $200 from Germany. On a regional basis, the cost of sending $200 and $500 from Saudi Arabia to Lebanon fell to $11.77 (5.88% of the transferred amount) and $16.31 (3.26%) in the third quarter of 2019.

LEBANON NEWS

Weekly Market Watch

SOURCE: WORLD BANK, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 5

From Total Cost

% of

Transferred

Amount

Total Cost

% of

Transferred

Amount

Total Cost

% of

Transferred

Amount

Total Cost

% of

Transferred

Amount

United States $21.89 10.94% $18.79 9.40% $27.85 5.57% $27.33 5.47%

Canada $19.19 9.60% $20.87 10.43% $30.01 6.00% $34.90 6.98%

Germany $23.84 11.92% $21.95 10.98% $38.49 7.70% $34.29 6.86%

France $15.89 7.95% $17.28 8.64% $32.25 6.45% $34.77 6.95%

Sweden $18.75 9.37% $18.80 9.40% $33.59 6.72% $33.54 6.71%

United Kingdom $22.70 11.35% $23.40 11.70% $35.61 7.12% $37.88 7.58%

Australia $24.11 12.05% $24.60 12.30% $34.68 6.94% $35.71 7.14%

Saudi Arabia $11.86 5.93% $11.77 5.88% $16.71 3.34% $16.31 3.26%


Cost of Sending Remittances to Lebanon

2nd Quarter of 2019 3rd Quarter of 2019

$200 $500

2nd Quarter of 2019 3rd Quarter of 2019

$0 $5 $10 $15 $20

Cuba

Lebanon

Cape Verde

Thailand

Ghana

Guyana

China

South Africa

Costa Rica

Indonesia

$19.24

$18.79

$18.45

$17.33

$16.51

$15.96

$15.01

$14.50

$13.48

$13.03

The 10 Most Expensive Destinations of Remittances Sent (per $200) from the United States in Q3-2019

Source: World Bank, Credit Libanais Economic Research Unit$0 $5 $10 $15 $20 $25

Lebanon

China

Afghanistan

Macedonia

Ghana

Moldova

Nigeria

Thailand

Hungary

Bosnia and Herzegovina

$21.95

$21.95

$20.71

$20.04

$19.49

$19.23

$17.93

$17.86

$17.77

$17.57

The 10 Most Expensive Destinations of Remittances Sent (per $200) from Germany in Q3-2019


LEBANON RANKS 44TH IN THE WORLD IN EIU’S 2019 GLOBAL MICROSCOPE INDEX

The Economist Intelligence Unit (EIU) released this week its “Global Microscope 2019” report in which it ranks 55 countries across the globe to evaluate the enabling environment for financial inclusion. More specifically,

the report defines financial inclusion as the “access to a full suite of quality financial services”, in addition to guaranteeing that customers have financial capability and that services are offered in a diverse and competitive marketplace. For that purpose, the EIU calculates the Global Microscope Index, which takes into account five pillars including “government and policy support”, “stability and integrity”, “products and outlets”, “consumer protection” and “infrastructure”. It is worth noting that each of said indicators takes into account several related sub-indicators. The report pointed out to a more favorable environment for financial inclusion around the world, with the top ranked countries improving their overall scores. According to the report,

Colombia held the top spot in the 2019 Global Microscope on financial inclusion with an overall index score of 82, followed by Peru (Rank: 2, Score: 80), Uruguay (Rank: 3, Score: 76), and Mexico (Rank:4, Score: 74), among others. On a regional basis, Jordan ranked first (28th internationally) with a score of 52 followed by Egypt and Morocco (29th international rank with a score of 51). On the local front, Lebanon was assigned an index score of 40 (in comparison with a score of 33 in 2018) for the year 2019, occupying as such the 44th position in the world (vs

the 50th place in 2018) and the 4th place in the region. The report indicated that Lebanon’s improvement can in part be attributed to a progress in its electronic KYC system while also highlighting that electronic

signatures are accepted for identity verification in Lebanon. In addition, the report revealed that BDL introduced in 2017 a financial inclusion strategy, yet little progress has been made so far concerning its implementation, added the fact that the non-banking financial institutions sector remains largely unregulated. Furthermore, the report indicated that progress was slow during the year 2019, yet indicated that BDL will be

launching a crypto-currency that can be used to facilitate local payments.

LEBANON NEWS

Weekly Market Watch

SOURCE: EIU, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 6

Country Score Global Rank

Colombia 82 1

Peru 80 2

Uruguay 76 3

Mexico 74 4

India 71 5

Philippines 71 5

Argentina 70 7

Indonesia 70 7

Brazil 69 9

Rwanda 68 10

Jordan 52 28

Egypt 51 29

Morocco 51 29

Lebanon 40 44

Tunisia 30 53

Middle East & North Africa Region

Global Microscope Index 2019

Source: Economist Intelligence Unit, Credit Libanais Economic Research Unit

Jordan

Egypt

Morocco

Lebanon

Tunisia

52

51

51

40

30

2019 Global Microscope Index Scores in the MENA Region

Source: Economist Intelligence Unit, Credit Libanais Economic Research Unit

OCCUPANCY RATE IN LEBANON’S HOSPITALITY SECTOR AT 75.4% IN JULY 2019

Ernst & Young (EY) published its “Middle East Hotel Benchmark Survey Report” on the performance of 4 and 5 star hotels in the Middle East region, conveying a 2.4 percentage-point annual increase in the average

occupancy rate in Beirut’s hospitality sector to 75.4% during the month of July 2019. Furthermore, the average room rate rose by 9.5% y-o-y to $216, with the average room yield soaring by 13.1% to $163.

The following chart captures the monthly evolution in the occupancy rate in Beirut’s 4 and 5 star hotels over the July 2018 – July 2019 period:

On a regional basis, Beirut recorded the 3rd highest average occupancy rate (70.2%) among covered Middle Eastern capitals during the first seven months of the current year, with Abu Dhabi outperforming its regional peers, recording the highest average occupancy rate of 76.6%, followed by Cairo (74.0%). In a related note, Beirut’s 4 and 5 star hotels charged the highest average room rate of $203, right ahead of their likes in Kuwait

($165) and Manama ($164), only to name a few.

LEBANON NEWS

Weekly Market Watch

SOURCE: ERNST & YOUNG, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 7

Jul-2018 Jul-2019 Change

Hotel Occupancy Rate (%) 73.0 75.4 2.4 pctg points

Average Room Rate (USD) 198 216 9.5%

Rooms Yield (USD) 144 163 13.1%

Performance of Beirut's Hospitality Sector During the Month of

Source: Ernst & Young, Credit Libanais Economic Research Unit

73%

73%

72%

70%

69% 70%

60%

71% 79%

85%

45%

77% 75%

40%

50%

60%

70%

80%

90%

Monthly Evolution of Hotel Occupancy in Beirut


Country - Capital Jul-2018 Jul-2019Change in

% PtsJul-2018 Jul-2019 % Change Jul-2018 Jul-2019 % Change

Bahrain - Manama 49.5 52.2 2.7 165 164 -0.1% 81 86 5.3%

Egypt - Cairo City 70.0 74.0 3.9 109 113 3.9% 76 84 9.7%

Jordan - Amman 57.7 58.9 1.2 152 148 -2.9% 88 87 -0.9%

Kuwait - Kuwait City 59.3 57.1 -2.2 178 165 -7.7% 106 94 -11.1%

Lebanon - Beirut 61.0 70.2 9.2 184 203 10.1% 113 143 26.7%

Oman - Muscat 55.7 58.5 2.8 143 127 -11.2% 80 75 -6.6%

Qatar - Doha 59.3 67.1 7.8 122 110 -9.6% 72 74 2.3%

Saudi Arabia - Riyadh 54.8 61.7 6.8 175 157 -10.7% 96 97 0.4%

United Arab Emirates - Abu Dhabi 74.3 76.6 2.3 96 102 5.7% 72 78 9.0%

Middle East Hotel Benchmark Survey During the Period Ended

Hotel Occupancy Rates (%) Average Room Rates (USD) Room Yields (USD)

Source: Ernst & Young - Middle East Hotel Benchmark Survey, Credit Libanais Economic Research Unit

0.0% 20.0% 40.0% 60.0% 80.0% 100.0%

Abu Dhabi

Cairo

Beirut

Doha

Riyadh

Amman

Muscat

Kuwait City

Manama

76.6%

74.0%

70.2%

67.1%

61.7%

58.9%

58.5%

57.1%

52.2%

Hotel Occupancy Rate in the Middle East Region up to

July 2019


0 50 100 150 200 250

Beirut

Kuwait City

Manama

Riyadh

Amman

Muscat

Cairo

Doha

Abu Dhabi

203

165

164

157

148

127

113

110

102

Average Room Rate in the Middle East up to July 2019 (USD)


INDUSTRIAL EXPORTS UP BY 4.32% Y-O-Y BY JULY 2019

According to the Ministry of Industry, Lebanon’s industrial exports expanded by 40.23% during the month of July 2019 to $227.6 million, up from $162.3 million in June. On a cumulative basis, moreover, industrial

exports rose by 4.32% y-o-y to $1,527.3 million during the first seven months of the current year, from $1,464.1 million during that same period last year. On the other hand, industrial imports fell by 27.19% annually to $123.2 million by July 2019, compared to

$169.2 million a year earlier.

Exports of “machinery and electrical equipment” accounted for the bulk ($297.5 million <19.48%>) of Lebanon’s total exports bill, followed by “products of the chemical industries” ($281.0 million <18.40%>) and “prepared foodstuffs and tobacco” ($238.5 million <15.62%>), only to name a few. On the imports front, Italy led the list of countries exporting to Lebanon ($29.4 million <23.89%>), followed by China ($23.4 million

<19.00%>) and Germany ($15.0 million <12.18%>), as elaborated in the section below:

LEBANON NEWS

Weekly Market Watch

SOURCE: THE LEBANESE MINISTRY OF INDUSTRY, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 8

Y-O-Y

(USD Million) July-2018 July-2019 % Change

Industrial Exports 1,464.1 1,527.3 4.32%

Industrial Imports of Equipment & Machinery 169.2 123.2 -27.19%

Source: Ministry of Industry, Credit Libanais Economic Research Unit

Evolution of Industrial Activity During the

Seven-Month Period Ending

1,360

1,380

1,400

1,420

1,440

1,460

1,480

1,500

1,520

1,540

YTD July-2017 YTD July-2018 YTD July-2019

1,427.6

1,464.1

1,527.3$ Million

Evolution of Industrial Exports


0

20

40

60

80

100

120

140

160

180

YTD July-2017 YTD July-2018 YTD July-2019

137.0

169.2

123.2

$ Million

Evolution of Industrial Imports of Equipment & Machinery


Product Value ($ Million)

Machinery and Electrical Equipment 297.5

Products of the Chemical Industries 281.0

Prepared Foodstuffs and Tobacco 238.5

Base Metals and Articles of Base Metal 201.5

Plastics and Rubber and Articles Thereof 103.4

Others 405.4

Total Industrial Exports 1,527.3

Source: M inistry of Industry, Credit Libanais Economic Research Unit

Breakdown of Industrial Exports by Product YTD July 2019

Country Value ($ Million)

Italy 29.4

China 23.4

Germany 15.0

Romania 6.5

United States 6.2

Others 42.6

Total Industrial Imports 123.2

Breakdown of Industrial Imports of Equipment & Machinery by

Country of Origin YTD July 2019

Source: M inistry of Industry, Credit Libanais Economic Research Unit

Machinery and

Electrical Equipment

19.48%

Products of the

Chemical Industries

18.40%

Prepared Foodstuffs

and Tobacco

15.62%

Base Metals and

Articles of Base Metal

13.19%

Plastics and Rubber

and Articles Thereof

6.77%

Others

26.54%

Breakdown of Industrial Exports by Product

YTD July 2019

Italy

23.89%

China

19.00%

Germany

12.18%

Romania

5.30%

United States

5.07%

Others

34.55%

Breakdown of Imports of Equipment & Machinery YTD July

2019

BALANCE OF TRADE DEFICIT NARROWS TO $11.37 BILLION BY AUGUST 2019

On the current account side of the balance of payments, Lebanon’s balance of trade deficit narrowed by

$358.27 million y-o-y to $11.37 billion in the first eight months of the current year, from $11.73 billion during

that same period last year, according to statistics published by the Lebanese Customs Administration. Said contraction in the deficit was triggered by a $478.75 million y-o-y hike in exports to just over $2.46 billion, which outweighed the $120.49 million increase in imports to nearly $13.84 billion.

Switzerland led the list of countries importing from Lebanon, with its imports invoice aggregating to $629 million (25.51% of Lebanon’s exports). The United States, on the other hand, topped the list of countries exporting to Lebanon, with its exports bill reaching $1,246 million (9.01% of Lebanon’s imports). This is

further elaborated in the tables below:

Exports of “pearls, precious stones and metals” accounted alone for 37.40% ($922 million) of total Lebanese exports by August 2019, followed by “chemical products” ($257 million <10.43%>), “prepared foodstuffs, beverages, and tobacco” ($249 million <10.10%>), and “machinery and electrical instruments” ($246 million

<9.98%>). On the other hand, “mineral products” constituted the lion’s share of imported goods ($4,732 million <34.20%>), trailed by “chemical products” ($1,404 million <10.15%>), “machinery and electrical instruments” ($1,223 million <8.84%>), and “vehicles, aircraft, vessels, and transport equipment” ($892 million <6.45%>).

LEBANON NEWS

Weekly Market Watch

SOURCE: HIGHER CUSTOMS COUNCIL, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 9

Balance of Trade Y-O-Y

(US$ Million) August 2018 August 2019 % Change

Exports 1,986 2,464 24.11%

Imports 13,718 13,839 0.88%

Trade Balance (11,733) (11,374) -3.05%

For the Eight-Month Period Ending

Source: Lebanese Customs Administration, Credit Libanais Economic Research Unit

-15,000

-10,000

-5,000

0

5,000

10,000

15,000

20,000

August 2018 August 2019

USD Million

Cumulative Balance of Trade Deficit

Exports Imports Deficit

Source: Higher Customs Council, Credit Libanais Economic Research Unit

ProductValue

($ Million)

% of

Total

Pearls, Precious Stones and Metals 922 37.40%

Chemical Products 257 10.43%

Prepared Foodstuffs; Beverages, Tobacco 249 10.10%

Machinery; Electrical Instruments 246 9.98%

Others 791 32.09%

Total Exports 2,464 100%

Breakdown of Exports by Product by August 2019


ProductValue

($ Million)

% of

Total

Mineral Products 4,732 34.20%

Chemical Products 1,404 10.15%

Machinery; Electrical Instruments 1,223 8.84%

Vehicles, Aircraft, Vessels, Transport Equipment 892 6.45%

Others 5,586 40.37%

Total Imports 13,839 100%

Breakdown of Imports by Product by August 2019


United States 1,246 9.01%

China 1,181 8.53%

Russia 1,095 7.91%

Italy 929 6.71%

Greece 905 6.54%


Major Import Sources (in USD Million)

Switzerland 629 25.51%

U.A.E. 296 12.03%

Saudi Arabia 159 6.47%

Syria 144 5.84%

Iraq 104 4.22%


Major Export Destinations (in USD Million)

CONSTRUCTION PERMITS AREA AT 4.04 MILLION SQM BY SEPTEMBER 2019

The surface area of construction permits in Lebanon, which reflects the level of future supply in the real estate sector, fell to 386,337 sqm during the month of September 2019, down from 392,088 sqm in August. On a

cumulative basis, the surface area of construction permits plunged by 27.53% y-o-y to 4,038,997 sqm in the first nine months of the current year, compared to 5,573,125 sqm during that same period last year.

As far as the geographical distribution of construction permits is concerned, the Mount Lebanon region continued to control the lion’s share of the total surface area of issued permits (1,763,815 sqm <43.67%>), followed by the South (958,513 sqm <23.73%>), Bekaa (494,931 sqm <12.25%>), Nabatieh (428,232 sqm <10.60%), and Beirut (352,640 sqm <8.73%>) regions. It is worth noting that figures for the North governorate are underestimated since they exclude permits issued by the North Order of Engineers.

The Beirut governorate enjoyed the highest exploitation coefficient, which stood at 664 sqm per construction permit by September 2019, followed by the Mount Lebanon (575 sqm/transaction), Bekaa (570 sqm/transaction), South (501 sqm/transaction), North (475 sqm/transaction), and Nabatieh (367 sqm/transaction) governorates.

LEBANON NEWS

Weekly Market Watch

SOURCE: ORDER OF ENGINEERS, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 10

Sep-2013 7,804,456

Sep-2014 8,759,182

Sep-2015 7,794,425

Sep-2016 6,511,201

Sep-2017 7,248,263

Sep-2018 5,573,125

Sep-2019 4,038,997

Source: Order o f Engineers, Credit Libanais Economic Research Unit

Evolution of Construction Permit Areas (Sqm)

During the Nine-Month Period Ending

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

Sep-2013 Sep-2014 Sep-2015 Sep-2016 Sep-2017 Sep-2018 Sep-2019

7,804,456

8,759,182

7,794,425

6,511,201

7,248,263

5,573,125

4,038,997

Cumulative Evolution of Construction Permit Areas (Sqm)

SqmNo. of

Transactions

Average

Sqm/Trans.

Beirut 352,640 531 664

Mount Lebanon 1,763,815 3,068 575

North* 40,866 86 475

Bekaa 494,931 868 570

South 958,513 1,912 501

Nabatieh 428,232 1,167 367

Total 4,038,997 7,632 529

* Figures for the North Governorate are underestimated since they exclude

permits issued by the North Order of Engineers

Geographical Breakdown of Construction Permits YTD

September 2019

Source: Order of Engineers, Credit Libanais Economic Research Unit

Beirut8.73%

Mount Lebanon43.67%

North*1.01%

Bekaa12.25%

South23.73%

Nabatieh10.60%

Geographical Breakdown of Construction Permit Areas YTD September 2019


300 350 400 450 500 550 600 650 700

Beirut

Mount Lebanon

Bekaa

South

North*

Nabatieh

664

575

570

501

475

367

Average Sqm/Construction Permit per Region YTD September 2019


CEMENT DELIVERIES DOWN BY 29.83% Y-O-Y BY AUGUST 2019

Cement deliveries, the coincident indicator of construction activity, fell by 14.28% during the month of August 2019 to 315,488 tons, down from 368,063 tons a month earlier. On a cumulative basis, cement deliveries

plunged by 29.83% y-o-y to 2,243,348 tons in the first eight months of the current year, compared to 3,196,992 tons during that same period last year.

Cement deliveries registered a negative compounded annual growth rate (CAGR) of 5.79% over the August

2012 - August 2019 period, mirroring the lackluster activity of Lebanon’s construction sector amidst the pale economic situation.

THE COINCIDENT INDICATOR DOWN BY 1.69% Y-O-Y IN AUGUST 2019

Banque Du Liban’s coincident indicator fell by 4.17% during the eighth month of the current year to 291.6, down from 304.3 in July. On an annual basis, the coincident indicator dropped by 1.69% from 296.6 in August of last year, portraying some deterioration in Lebanon’s overall economic activity. It is worth noting that the coincident indicator is a gauge used to measure Lebanon’s macroeconomic activity and comprises the import

of petroleum derivatives, electricity production, check clearing activity, cement deliveries, foreign passengers, foreign trade, and the M3 monetary aggregate.

LEBANON NEWS

Weekly Market Watch

SOURCE: BDL, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 11

August 2012 3,406,496

August 2013 3,650,328

August 2014 3,693,154

August 2015 3,155,646

August 2016 3,418,717

August 2017 3,354,258

August 2018 3,196,992

August 2019 2,243,348

Evolution of Cumulative Cement

Deliveries (Tons)

Source: BDL, Credit Libanais Economic Research Unit

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

YTD Aug-2012

YTD Aug-2013

YTD Aug-2014

YTD Aug-2015

YTD Aug-2016

YTD Aug-2017

YTD Aug-2018

YTD Aug-2019

3,406,4963,650,328

3,693,154

3,155,646 3,418,717

3,354,258

3,196,992

2,243,348

Yearly Evolution of Cement Deliveries


Tons

275

280

285

290

295

300

305

310

315

320

Aug-18 Oct-18 Dec-18 Feb-19 Apr-19 Jun-19 Aug-19

296.6

292.3

309.2

316.5

300.7

295.9297.9

309.7

316.1

297.4

293.1

304.3

291.6

Evolution of Lebanon's Coincident Indicator


BDL’S FOREIGN CURRENCY RESERVES REACH $34.53 BILLION AT END OF OCTOBER 2019

The Lebanese Central Bank’s balance sheet conveys some $203.22 million contraction in its foreign assets

portfolio during the second half of October 2019 to $37.93 billion, down from $38.13 billion a fortnight ago.

When factoring out BDL’s portfolio of Lebanese Eurobonds amounting to $3.4 billion as per the disclosure made by the Central Bank, the latter’s foreign currency reserves would settle at $34.53 billion by end of October, compared to $34.83 billion as at mid-October. On the other hand, the value of gold reserves at BDL expanded by 0.77% ($106.24 million) in the second half of October to $13.89 billion as gold prices improved following “dismal” U.S. economic data related to the manufacturing industry. On an annual basis, BDL’s foreign assets came in 12.09% ($5.22 billion) lower than the $43.15 billion reading reported at end of October 2018. Conversely, the value of gold reserves soared by 23.62% ($2.65 billion) when benchmarked to the $11.24 billion figure recorded in the same period last year. It is worth noting that

BDL’s total reserves (foreign currency and gold) cover some 114 months of debt service and constitute around 56.23% and 62.55% of Lebanon’s gross and net public debt on a respective basis.

In a related note, BDL’s balance sheet widened by $1.35 billion during the second half of October to $136.72

billion owing to some 4.02% expansion in the value of other assets to $35.37 billion, coupled with a 1.36% increase in the value of the securities portfolio to $34.26 billion and a 1.27% improvement in the value of gold reserves to $13.89 billion, which altogether outweighed the 1.51% drop in the value of foreign assets to

$37.93 billion and the 0.44% decline in loans to the local financial sector to $15.00 billion.

The share of BDL’s foreign assets of the latter’s total assets fell to 27.44% by end of October 2019, compared to 28.01% at mid-October, with that of gold reserves increasing slightly to 10.16%.

LEBANON NEWS

Weekly Market Watch


$ BillionEnd of

October 2013

End of

October 2014

End of

October 2015

End of

October 2016

End of

October 2017

End of

October 2018

End of

October 2019

Gold 12.26 10.81 10.59 11.74 11.75 11.24 13.89

Foreign Assets 35.63 38.87 37.74 40.56 43.48 43.15 37.93

Source: Banque Du Liban, Credit Libanais Economic Research Unit

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00

End ofOctober 2013

End ofOctober 2014

End ofOctober 2015

End ofOctober 2016

End ofOctober 2017

End ofOctober 2018

End ofOctober 2019

12.2610.81 10.59

11.74 11.75 11.2413.89

35.63

38.87 37.7440.56

43.48 43.15

37.93

Evolution of Foreign Assets and Gold Reserves at Banque Du Liban

Gold Foreign Assets


USD Billion

As a % of Gross Public Debt (1) 56.23%

As a % of Net Public Debt (1) 62.55%

In Months of Debt Service (2) 113.76

Source: MOF, ABL, Credit Libanais Economic Research Unit

(2) Average Monthly Debt Service as at End of July 2019

(1) As at End of August 2019

Total Reserves

Foreign Assets

27.74%

Gold Reserves

10.16%

Securities

Portfolio

25.06%

Loans to Public

Sector

0.00%

Loans to Local

Financial Sector

10.97%

Valuation

Adjustment

0.00%

Other Assets

25.87%

Fixed Assets

0.19%

Breakdown of BDL's Balance Sheet as at End of October 2019


$ BillionEnd of October

2018

Mid-October

2019

End of

October 2019

Bi-Weekly

(% Change)

Y-O-Y

(% Change)

Foreign Assets 43.15 38.51 37.93 -1.51% -12.09%

Gold Reserves 11.24 13.72 13.89 1.27% 23.62%

Securities Portfolio 29.38 33.80 34.26 1.36% 16.61%

Loans to Public Sector 0.00 0.00 0.00 0.00% 0.00%

Loans to Local Financial Sector 29.29 15.07 15.00 -0.44% -48.79%

Valuation Adjustment 0.00 0.00 0.00 0.00% 0.00%

Other Assets 24.66 34.01 35.37 4.02% 43.44%

Fixed Assets 0.24 0.26 0.26 -0.56% 5.53%

Total Assets 137.97 135.37 136.72 1.00% -0.91%

Currency in Circulation Outside BDL 3.67 4.29 4.85 12.84% 31.96%

Financial Sector Deposits 115.76 110.42 111.31 0.80% -3.84%

Public Sector Deposits 5.44 3.89 3.42 -12.06% -37.18%

Valuation Adjustment 5.74 8.26 8.44 2.17% 47.08%

Other Liabilities 3.72 4.84 5.04 4.12% 35.48%

Capital Accounts 3.64 3.66 3.66 0.00% 0.77%

Total Liabilities 137.97 135.37 136.72 1.00% -0.91%


OPENED LETTERS OF CREDITS UP BY 1.19% Y-O-Y BY AUGUST 2019

According to Banque Du Liban statistics, opened letters of credit (L/Cs), a measurement tool for trade activity, contracted by 25.26% during the month of August 2019 to $740.36 million, down from $990.58 million in

July. On a cumulative basis, the face value of opened L/Cs came in 1.19% higher y-o-y at $6,567.42 million

during the first eight months of the current year, compared to $6,490.09 million a year earlier.

Documentary L/Cs opened to finance imports activities contracted by 0.60% on an annual basis to $4,372.07 million YTD August 2019, from $4,398.26 million during that same period last year. Concurrently, utilized credits for imports increased by 6.68% to $4,025.93 million, up from $3,774.01 million by August 2018. Nonetheless, inward bills for collection, another documentary credit form of financing (backed by invoices), fell by 8.79% y-o-y to $615.64 million by end of August, from $674.97 million a year before.

In a related note, documentary L/Cs opened to finance exports activities increased by 4.95% on a yearly basis to $2,195.35 million in the first eight months of this year, from $2,091.83 million in the equivalent period last year. In the same vein, utilized credits to finance exports rallied by 14.87% to $2,030.25 million (92.48% of opened L/Cs for exports). Conversely, the value of outstanding bills sank by 17.43% annually to $376.25 million YTD August 2019, with outward bills for collection receding by 25.61% to $691.60 million.

LEBANON NEWS

Weekly Market Watch


-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Up toAugust-2012

Up toAugust-2013

Up toAugust-2014

Up toAugust-2015

Up toAugust-2016

Up toAugust-2017

Up toAugust-2018

Up toAugust-2019

6,963.86 7,110.04

5,867.51

5,203.71

4,213.40

6,230.91 6,490.09 6,567.42

Million

Evolution of Total Opened L/Cs


$ Million August 2018 August 2019Y-O-Y

% Change

Documentary L/Cs

– Opened Credits 4,398.26 4,372.07 -0.60%

– Utilized Credits 3,774.01 4,025.93 6.68%

– Outstanding Credits 1,197.68 870.45 -27.32%

Bills For Collection

– Inward Bills 674.97 615.64 -8.79%

– Outstanding Bills 57.71 49.15 -14.83%


Documentary Credits for Imports' Financing for the Period Ended

0

1,000

2,000

3,000

4,000

5,000


4,398.26 4,372.07

674.97615.64

$ Million

Opened Letters of Credits & Inward Bills for Imports' Financing During the Period Ended

– Opened Credits – Inward Bills

$ Million August 2018 August 2019Y-O-Y

% Change

Documentary L/Cs

– Opened Credits 2,091.83 2,195.35 4.95%

– Utilized Credits 1,767.47 2,030.25 14.87%

– Outstanding Credits 874.10 837.48 -4.19%

Bills For Collection

– Outward Bills 929.72 691.60 -25.61%

– Outstanding Bills 455.66 376.25 -17.43%


Documentary Credits for Exports' Financing for the Period Ended

0

500

1,000

1,500

2,000

2,500


2,091.83 2,195.35

929.72

691.60

$ Million

Opened Letters of Credits & Outward Bills for Exports' Financing During the Period Ended

– Opened Credits – Outward Bills

ANNUAL INFLATION IN LEBANON AT 1.09% IN SEPTEMBER 2019

According to the Central Administration of Statistics (CAS), monthly inflation in Lebanon, as captured by the change in the consumer price index (CPI), stood at 0.31% in September 2019, compared to a mere 0.01% in

the previous month. On an annual basis, moreover, Lebanon’s CPI rose by 1.09% to 108.85 in September of

the current year, from 107.68 a year before. In details, the index portrays a 13.05% annual hike in the prices of clothing & footwear (5.2% weight in the index), a 0.48% increase in the prices of food & non-alcoholic beverages (20.0% weight in the index), a 5.08% surge in education prices (6.6% weight in the index), and a 1.39% appreciation in the prices of housing - owner occupied (13.6% weight in the index), only to name a few. On the other hand, the prices of housing – water, electricity, gas and other fuels (11.8% weight in the index) fell by 4.66% on a yearly basis, accompanied by a 1.56% contraction in transportation prices (13.1% weight in the index). The following section captures the fluctuation in the key constituents of Lebanon’s

consumer basket:

On a geographical basis, the North (1.27%), Beirut (0.22%), Mount Lebanon (0.16%), and South (0.08%)

regions witnessed a monthly appreciation in their CPI values in September, while the Nabatieh (-0.17%) and Bekaa (-0.12%) regions witnessed slight drops in their CPI values.

The following chart captures the evolution of the yearly change in CPI values since December 2011:

LEBANON NEWS

Weekly Market Watch

SOURCE: CAS, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 14

Monthly

(August 2019 -

September 2019) %

Change

Annual

(September 2018 -

September 2019) %

Change

Weight

Food & Non-Alcoholic Beverages 0.19% 0.48% 20.0%

Alcoholic Beverages & Tobacco 0.08% 0.34% 1.4%

Clothing & Footwear 8.84% 13.05% 5.2%

Housing - Actual Rent 0.11% 2.15% 2.9%

Housing - Owner Occupied 0.24% 1.39% 13.6%

Housing - Water, Electricity, Gas &

Other Fuels-0.72% -4.66% 11.8%

Furnishings, Household Equipment &

Routine Household Maintenance0.42% 6.54% 3.8%

Health -0.74% 0.03% 7.7%

Transportation -0.77% -1.56% 13.1%

Communication 0.56% 0.04% 4.5%

Recreation, Amusement, and Culture -0.13% 6.83% 2.4%

Education 0.00% 5.08% 6.6%

Restaurant & Hotels 0.02% 1.19% 2.8%

Miscellaneous Goods & Services 0.09% 2.79% 4.1%

Consumer Price Index 0.31% 1.09% 100.0%

Price Volatility

Source: Central Administration of Statistics, Credit Libanais Economic Research Unit

Region Monthly Inflation Weight

Beirut 0.22% 10.8%

Mount Lebanon 0.16% 47.2%

North 1.27% 18.0%

Bekaa -0.12% 9.2%

South 0.08% 8.7%

Nabatieh -0.17% 6.1%

Lebanon 0.31% 100.0%

September 2019 Inflation Across Regions

Source: Central Administration of Statistics, Credit Libanais Economic Research Unit

4.60%

3.10%

10.10%

1.10%

-1.43%

-3.40%

3.14%3.98%

1.09%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

Evolution of Yearly Change in CPI

BSE TRADING VALUE AT $873 MILLION BY OCTOBER 2019

Activity on the Lebanese stock market tumbled into a nosedive during the tenth month of the year as the official market was closed for almost two weeks in light of the social uprising that was instigated on the night

of October 17, prompting a large number of institutions across the country to halt their operations amid the widespread protests and road blockades. Nevertheless, the total number of shares traded on the BSE was boosted by a large block trade on BLOM Bank listed shares earlier that month involving more than 4 million

stocks. In figures, volume traded on the BSE soared to nearly 5.20 million shares during the month of October 2019, up from around 1.99 million shares a month earlier. Concurrently, value traded rallied month-on-month to $34.99 million, from $20.46 million in September. Trades mainly consisted of banking stocks, which represented 96.40% of the total traded volume, followed by real estate (3.60%) stocks, with no activity on industry & trading stocks being recorded. From another standpoint, market capitalization narrowed to just below $7.55 billion in October, from around $7.86 billion in September and circa $9.75 billion in October of last year.

On a cumulative basis, the number of shares changing hands on the BSE stood at 197.74 million shares during the first ten months of the current year, with value traded approaching $873.44 million. As far as trading multiples are concerned, the weighted average Price to Book Value (P/BV) multiple of listed stocks ended the month of October lower at 0.524x, compared to 0.542x in September and 0.710x in October 2018, owing to the sharp drop in the prices of listed stocks.

Overall, trading activity was somewhat denser during the tenth month of this year amid the aforementioned block trade, as evidenced by the increase in the turnover ratio (being the number of shares traded divided by total listed shares) to 0.30%, up from 0.11% in September. The turnover ratio also appreciated on a cumulative basis to reach 11.26% YTD October 2019, compared to 4.00% in the same period a year before.

LEBANON NEWS

Weekly Market Watch

SOURCE: BSE, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 15

Real Estate Sector, 3.60%

Banking Sector, 96.40%

Industry & Trading Sector,

0.00%

Allocation of Traded Volume in October 2019

Real Estate Sector,2.90%

Banking Sector,97.10%

Industry & Trading Sector,0.00%

Allocation of Traded Value in October 2019

Analysis of the BSE Activity

September 2019 October 2019Monthly %

ChangeOctober 2018 October 2019

Y-O-Y %

Change

Traded Value ($ 000) 20,464 34,990 70.98% 520,702 873,436 67.74%

Traded Volume (000) 1,989 5,199 161.37% 70,284 197,742 181.35%

Market Capitalization ($ Million) 7,858 7,546 -3.96% 9,748 7,546 -22.59%

Traded Value/Market Capitalization 0.26% 0.46% 5.34% 11.57%

Turnover Ratio 0.11% 0.30% 4.00% 11.26%

Weighted Average P/BV 0.542 0.524 0.710 0.524

For the Period EndedFor the Month of

Source: BSE, Credit Libanais Economic Research Unit

520,702

873,436

70,284

197,742

9,748

7,546

0

2,000

4,000

6,000

8,000

10,000

12,000

0100,000200,000300,000400,000500,000600,000700,000800,000900,000

1,000,000

YTD Oct-2018 YTD Oct-2019

Beirut Bourse Cumulative Trading Activity

Traded Value ($ 000) Traded Volume (000)

Market Capitalization ($ Million)

BEIRUT PORT FREIGHT ACTIVITY DOWN BY 12.80% Y-O-Y BY SEPTEMBER 2019

Beirut Port freight activity contracted to around 488.7 thousand tons during the month of September 2019, from 576.2 thousand tons in the previous month. On a cumulative basis, freight activity fell by 12.80% y-o-y

to 5,184 thousand tons during the first nine months of the year 2019, from 5,945 thousand tons during that same period last year. In addition, the number of vessels dropped by 5.31% on a yearly basis to 1,338, while the number of imported cars via the Beirut Port plunged by 10.62% (5,588 cars) to 47,008. In a related context, the Beirut port handled containers with a total cargo capacity of around 965.528 thousand TEUs (including transshipments) in comparison with a cargo capacity of some 977.138 thousand TEUs in the first

nine months of 2018. Overall, Beirut Port revenues fell by 12.34% y-o-y to reach $152.84 million by September 2019 compared to $174.36 million in the first nine months of 2018.

LEBANON NEWS

Weekly Market Watch

SOURCE: BEIRUT PORT, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 16

September 2018 September 2019 % Change

Freight Activity (000 Tons) 5,945 5,184 -12.80%

Number of Vessels 1,413 1,338 -5.31%

Number of Imported Cars 52,596 47,008 -10.62%

Container Capacity (TEU+TS) 977,138 965,528 -1.19%

Revenues ($ Million) 174.36 152.84 -12.34%

For the Nine-Month Period Ending Port of Beirut

Indicators

Source: Beirut Port, Credit Libanais Economic Research Unit

0

1,000

2,000

3,000

4,000

5,000

6,000

September2015

September2016

September2017

September2018

September2019

6,096 6,600 6,401 5,945

5,184

Thousand Tons

Evolution of Cumulative Freight Activity in the Beirut

Port

Source: Beirut Port, Credit Libanais Economic Research Unit

FITCH DOWNGRADES THE RATING OF BANK AUDI AND BYBLOS BANK TO “CCC-”

Fitch Ratings, the international rating agency, downgraded on October 29, 2019 the long-term Issuer Default Rating (IDR) of two Lebanese banks, namely Bank Audi and Byblos Bank, from “CCC” to “CCC-”, while placing

both banks on Rating Watch Negative (RWN). Concurrently, the agency lowered the banks’ viability rating

(VR) from “ccc” to “ccc-”, yet kept their short-term IDR, support rating and support rating floor unchanged at “C”, “5” and “No Floor”. In detail, the agency mentions that the downgrades showcase “heightened liquidity risks” the 2 concerned banks and the sector in general are facing amid the increasing political bickering and social upheaval which prompted banks to close since October 18 as a result of protests and demonstrations. In addition, Fitch considers that deposits in the banking sector are under pressure amid weaker confidence. The agency also stated that the RWN implies the likelihood of further rating downgrade if liquidity in foreign currency undergoes additional pressure, noting that in the case of Bank Audi, its deposit dollarization rate

stood at 88% in the first half of 2019, while that of Byblos Bank leveled at 69%. Fitch further mentioned the asset liability mismatch of both banks, citing their weak foreign currency liquidity namely in the form of long-term placements and certificates of deposits at the Central Bank, which make their customer deposits “vulnerable to unexpected deposit outflows” since deposits are mostly short-term in nature. The agency stated that both banks and the banking sector in general may have difficulties in having access to foreign currency liquidity depending on the Central Banks’ ability to meet banks’ foreign currency obligations at times of economic distress. Fitch also considered both banks’ asset quality and core capitalization ratios as “weak” as a

result of their high exposure to the Central Bank (47% of total assets and 7.4x Fitch Core Capital in the first

half of 2019 for Bank Audi and 52% of total assets and 9.1x Fitch Core Capital for Byblos Bank) and to the Lebanese government (9% of total assets and 1.4x Fitch Core Capital in the first half of 2019 for Bank Audi and 12% of total assets and 2.1x Fitch Core Capital for Byblos Bank). Furthermore, the rating agency stated that both banks may face additional pressure on their profitability on the back of the increasing cost of funds and loan impairment, notwithstanding their resilient loan quality (stages 2 and 3 loans as a percentage of

gross loans stood at 16% and 7% respectively in the first half of 2019 for Bank Audi, while standing at 6.7% and 5.3% for Byblos Bank). Fitch commented that the IDRs and the VRs might see additional downgrades in the event the banks experience funding stress that might affect their liquidity levels, the Lebanese authorities intervene in the banking sector deposits limiting their deposits ability to service their obligations and if the concerned banks remain closed for a period of one month. Fitch reported that any additional downgrade of the sovereign will

bring upon an additional downgrade to both Bank Audi and Byblos Bank given their high direct exposure to the sovereign. On the other hand, the agency mentioned that an upgrade of both banks’ Support Ratings and upward revision of their Support Rating Floors is contingent upon an improvement in the government’s ability to support the banking sector through a “multi-notch” sovereign upgrade, which it believes is highly unlikely to happen.

Weekly Market Watch

SOURCE: FITCH RATINGS, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 17

CORPORATE NEWS

Bank Rating Class Rating Outlook

Long-Term IDR CCC- -

Short-Term IDR C -

Viability Rating ccc- -

Support Rating 5 -

Support Rating Floor No Floor -

Long-Term IDR CCC- -

Short-Term IDR C -

Viability Rating ccc- -

Support Rating 5 -

Support Rating Floor No Floor -

Bank Audi

Byblos Bank

Source: Fitch Ratings, Credit Libanais Economic Research Unit

SOLIDERE GROUP REPORTS NET PROFIT OF $42 MILLION IN H1-2019

The Lebanese Company for the Development and Reconstruction of the Beirut Central District S.A.L. (Solidere)

released its consolidated financial statements (which take into account the company’s subsidiaries), reporting

a net profit of $42.14 million in the first half of the current year, compared to a net loss of $99.10 million during that same period last year. In detail, revenues from property and land sales soared to $151.06 million, eclipsing as such the 7.76% annual contraction in rental revenues to $27.22 million, the 1.89% drop in revenues from provided services to $3.92 million, and the 55.72% nosedive in gains on sale of investment properties to $0.11 million. Consequently, net operating profit rallied by nearly six folds year-on-year to

$101.46 million, which was met by an 11.21% decrease in general and administrative expenses to $12.54 million. In parallel, the Group’s provisions for impairment stood at $0.87 million in H1-2019, compared to a negative $78.67 million a year earlier. Furthermore, Solidere suffered a $16.49 million loss from its participation in affiliated entities, compared to a $12.71 million loss registered by end of June 2018. On the balance sheet front, Solidere Group’s consolidated assets narrowed by 6.25% during the first half of the year 2019 to just below $2.33 billion, down from $2.48 billion at year-end 2018. More specifically, accounts and notes receivable sank by 23.84% to $111.63 million, with land inventory & projects under construction

receding by 4.14% to around $1.16 billion (circa 49.64% of total assets). On the other hand, total liabilities plummeted by 28.22% to $501.52 million, while shareholders’ equity rose by 2.36% to about $1.83 billion.

Weekly Market Watch

SOURCE: BSE, SOLIDERE, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 18

CORPORATE NEWS

In Millions of USD

As at End of

December 2018

As at End of

June 2019YTD %

Change

Key Balance Sheet Figures

Total Assets 2,481.97 2,326.97 -6.25%

o/w: Accounts & Notes Receivable (Net) 146.58 111.63 -23.84%

Land Inventory & Projects Under Construction 1,204.90 1,155.01 -4.14%

Investment Properties (Net) 584.46 579.47 -0.85%

Investments in Affiliates & Related Companies 397.60 381.13 -4.14%

Total Liabilities 698.65 501.52 -28.22%

o/w: Short-Term Credit Facilities 122.05 64.33 -47.29%

Long-Term Loans 361.60 214.60 -40.65%

Other Liabilities 215.00 222.59 3.53%

Shareholders' Equity 1,783.32 1,825.45 2.36%

In Millions of USD H1-2018 H1-2019Y-O-Y %

Change

Key P&L Figures

Gross Revenues from Property and Land Sale 0.00 151.06 -

Rental Revenues 29.51 27.22 -7.76%

Revenues from Provided Services 4.00 3.92 -1.89%

Gain on Sale and Disposal of Investment Properties 0.24 0.11 -55.72%

Net Operating Profit 17.13 101.46 492.33%

Share of (Loss)/Income from Associates (12.71) (16.49) 29.74%

General and Administrative Expenses 14.13 12.54 -11.21%

Write-Off of Receivables 0.42 0.08 -80.07%

Provisions for Impairment (Net) (78.67) 0.87 -101.11%

Provisions for Contingencies (0.50) (0.50) 0.00%

Interest Expense 16.43 15.67 -4.64%

Net After-Tax Profit (99.10) 42.14 142.52%

Solidere Group

Source: Solidere, BSE, Credit Libanais Economic Research Unit

MONETARY AGGREGATES

All monetary aggregates ended the week of October 10, 2019 on a negative note. In fact, the overall money supply, “M4”, plunged by LBP 860.71 billion on a weekly basis and by 2.18% on an annual basis to LBP

218,601 billion, noting that the non-banking sector’s Treasury bills portfolio increased by LBP 128 billion during

the concerned week.

Similarly, Lebanese-Pound denominated deposits and currency in circulation, “M1”, narrowed by LBP 141.01 billion week-on-week to LBP 11,505 billion on the back of some LBP 95 billion drop in demand deposits, coupled with a LBP 46 billion contraction in money in circulation. Local currency term deposits, “M2”, sank by

LBP 989.14 billion on a weekly basis and by 12.99% year-on-year to settle at LBP 68,860 billion.

Consequently, private sector term and saving deposits denominated in LBP (“M2-M1”) shed LBP 848.14 billion (1.46%) to LBP 57,354 billion during the week of October 10, while deposits denominated in foreign currencies (“M3-M2”) inched up by LBP 0.63 billion (0.00%) to reach LBP 138,563 billion.

MONEY MARKETS

The October 10 Treasury bill auction raised LBP 1,378.207 billion ($914.233 million), compared to LBP 41.212 billion ($27.338 million) during the auction of the previous week.

The majority of subscriptions was concentrated in the seven-year (44.33%) to maturity T-bonds, followed by the six-month (41.15%) and three-year (14.51%) tenure Treasury securities.

Consequently, the weighted average yield on Lebanese Pound Treasury bills stood at 7.49% in the auction of October 10. The yields on the six-month, three-year, and seven-year to maturity Treasury securities remained flat at 5.85%, 7.50%, and 9.00% respectively.

CORPORATE NEWS

MONETARY PERFORMANCE

Weekly Market Watch

SOURCE: BDL, REUTERS, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 19

Lebanese Treasury Bills 3 Months 6 Months 12 Months 24 Months 36 Months 60 Months 84 Months 120 Months 180 Months

Treasury Yield 5.30% 5.85% 6.50% 7.00% 7.50% 8.00% 9.00% 10.00% 10.92%

3 Months

6 Months

12 Months

24 Months

36 Months60 Months

84 Months

120 Months

180 Months

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

10.00%

11.00%

12.00%

0 1 2 3 4 5 6 7 8 9 10

On the Run Yield Curve

Lebanese

Treasury

Bills

Yield (%)

Face Value

(in billions

of LBP)

% of Total

Face Value

6 Months 5.85% 567.200 41.15%

3 Years 7.50% 200.004 14.51%

7 Years 9.00% 611.003 44.33%

Total 1,378.207 100.00%

Source: Reuters, Credit Libanais Economic Research Unit

October 10, 2019

Mone y Supply

LBP Billion

M1 11,646 11,505 - 1.21%

M2 69,849 68,860 - 1.42%

M3 208,412 207,423 - 0.47%

M4 219,461 218,601 - 0.39%

M2 - M1 5 8 ,2 0 3 5 7 ,3 5 4 - 1.4 6 %

M3 - M2 13 8 ,5 6 3 13 8 ,5 6 3 0 .0 0 %

Oc tobe r 3 , 2 0 19 Oc tobe r 10 , 2 0 19 % Cha nge

Source: Banque Du Liban, Credit Libanais Economic Research Unit150,000

200,000

250,000

October 3, 2019 October 10,

2019

219,461 218,601

208,412 207,423

Money Supply - LBP Billion -

M4 M3


2 0 12 2 0 13 2 0 14 2 0 15 2 0 16 2 0 17 2 0 18 2 0 19

MACROECONOMIC INDICATORS

GDP (Current Prices) ($ Billion) 44.23 46.87 48.30 49.97 51.24 53.39 56.37* 58.57*

Real GDP Growth Rate 2.72% 2.62% 1.88% 0.42% 1.61% 0.55% 0.25%* 0.20%*

GDP per Capita (Current Prices) ($) 8,997 8,883* 8,619* 8,540* 8,530* 8,778* 9,251* 9,655*

Foreign Direct Investment Inflows ($ Billion) 3.1 2.7 2.9 2.4 2.6 2.6 2.9 2.6*

FDI/GDP Ratio 7.03% 5.68% 6.03% 4.70% 5.09% 4.93% 5.14% 4.46%

INDUSTRY

Industrial Exports ($ Million) 3,567 3,384 3,150 2,956 2,527 2,474 2,548 1,527 (4)

Import of Industrial Machinery ($ Million) 288 300 269 234 236 257 266 123 (4)

TOURISM

Total Number of Tourists 1,365,845 1,274,362 1,354,647 1,517,927 1,688,357 1,856,795 1,963,917 1,441,499 (5)

Growth in Tax- Free Spending - 6% 4% 8% 2% - 9% 5% 7% 12% (3)

REAL ESTATE

Value of Real Estate Transactions ($ Million) 9,175 8,708 8,952 8,006 8,482 9,954 8,134 4,738 (6)

Number of Real Estate Sales Transactions 74,569 69,198 70,721 63,386 64,248 73,541 60,714 36,952 (6)

Construction Permits (000 sqm) 12,362 10,527 11,159 10,294 9,935 9,271 7,144 4,039 (6)

Cement Delivery (000 Tons) 5,309 5,831 5,517 5,043 5,265 5,149 4,702 2,243 (5)

TRANSPORTATION

Beirut Port: Freight Activity (000 Tons) 7,225 8,268 8,281 7,240 8,737 8,629 7,985 5,184 (6)

Beirut Airport: Number of Passengers (Million) 5.96 6.26 6.57 8.22 7.61 8.24 8.84 7.04 (6)

FOREIGN TRADE

Imports ($ Million) 21,280 21,228 20,494 18,069 18,705 23,130 19,980 13,839 (5)

Exports ($ Million) 4,483 3,936 3,313 2,952 2,977 2,844 2,952 2,464 (5)

Trade Balance ($ Million) (16,797) (17,292) (17,181) (15,117) (15,729) (20,287) (17,028) (11,374) (5)

Current Account Defic it / GDP Ratio 25.19% 27.44% 28.17% 19.26% 23.14% 25.68% 27.01%

BALANCE OF PAYMENTS

Net Foreign Assets at the Financial Sector ($ Million) (1,537) (1,127) (1,407) (3,354) 1,238 (157) (4,823) (4,397) (5)

Foreign Assets at BDL ($ Billion) 35.74 35.29 37.86 37.09 40.71 41.99 39.67 37.93 (8)

Foreign Currency Reserves ($ Billion) - - - - - - - 34.53 (8)

Gold Reserves at BDL ($ Billion) 15.31 11.10 10.95 9.85 10.71 11.96 11.77 13.89 (8)

PUBLIC FINANCE

Government Expenditures ($ Million) 13,321 13,640 13,952 13,528 14,867 15,381 17,792 9,385 (4)

Government Revenues ($ Million) 9,396 9,420 10,879 9,576 9,923 11,625 11,546 6,976 (4)

Budget Primary Defic it / Surplus ($ Million) (110) (240) 1,307 724 21 1,428 (636) 577 (4)

Total Defic it ($ Million) (3,925) (4,220) (3,073) (3,952) (4,944) (3,756) (6,246) (2,409) (4)

Defic it / GDP Ratio 8.87% 9.00% 6.36% 7.91% 9.65% 7.03% 11.07%

Debt Service / GDP Ratio 8.18% 8.09% 9.07% 9.36% 9.69% 9.71% 9.95%

Net Public Debt ($ Billion) 49.12 53.18 57.30 61.54 65.42 69.32 75.72 77.58 (5)

Gross Public Debt/GDP Ratio 130.42% 135.44% 137.82% 140.71% 146.15% 148.96% 151.03%* 155.13%*

MONETARY AGGREGATES & INFLATION

M4 ($ Billion) 110.00 117.41 124.53 131.17 139.20 145.16 148.31 145.01 (7)

(M2- M1) ($ Billion) 39.32 40.56 43.27 46.25 47.95 45.45 42.98 38.05 (7)

Monetization Level (M2/GDP Ratio) 99.15% 97.17% 100.66% 104.17% 106.25% 98.05% 89.84%

Change in CPI (%) 4.68% 2.05% - 1.66% - 3.40% 3.14% 5.01% 3.98% 1.09% (6)

BANKING SYSTEM

Number of Commercial Banks 54 56 55 53 50 49 49 49 (1)

Number of Branches 962 985 1,020 1,039 1,056 1,065 1,080 1,080 (1)

Total Assets ($ Million) 151,883 164,821 175,697 185,989 204,311 219,856 249,484 261,895 (5)

Total Deposits ($ Million) 127,657 139,166 147,637 154,951 166,446 172,965 178,556 177,273 (5)

Loans to the Private Sector ($ Million) 43,452 47,381 50,899 54,224 57,180 60,318 59,386** 55,161 (5)

Customer Loans/ Deposits 34.04% 34.05% 34.48% 34.99% 34.35% 34.87% 33.26%**

31.12% (5)

Dollarization Rate 64.82% 66.14% 65.71% 64.88% 65.82% 68.72% 70.62% 72.01% (5)

Exchange Rate (LBP to USD) 1,507.50 1,507.50 1,507.50 1,507.50 1,507.50 1,507.50 1,507.50 1,507.50

Recap of Lebanon's Major Indicators

(1) As at End of M arch, 2019, (2) As at End of M ay, 2019, (3) As at End of June, 2019, (4) As at End of July, 2019, (5) As at End of August, 2019, (6) As at End of September, 2019, (7) As at October 10, 2019, (8)

As at End of October, 2019

** Year 2018 loan figures and onwards reflect BDL's reclassification of some balance sheet items to meet IFRS9 requirements.

* Figures Reflect IM F Estimates

LEBANON’S MAIN INDICATORS

Weekly Market Watch

SOURCE: CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 20

LEBANON’S RATINGS

Weekly Market Watch

SOURCE: S&P GLOBAL RATINGS, MOODY’S, FITCH RATINGS, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 21

Rating Agency Tenor Rating

Long- Term B-

Short- Te rm B

Moody's Investors Service Long- Term Caa1

Long- Term CCC

Short- Te rm C

Source: S&P Global Ratings, M oody's Investors Service, Fitch Ratings, Credit Libanais Economic Research Unit

Republic Of Lebanon Sovereign Ratings

Outlook

Standard & Poor's Globa l

Ra tings

Fitch Ra tings

Watch Neg

-

RUR Possible Downgrade

Rated Banks

Long Term

Foreign

Currency

Outlook Long

Term

IDR

Outlook Long-Term

Counterparty

Credit Rating

Short-Term

Counterparty

Credit Rating

Outlook

Bank Audi Caa1 Possible Downgrade CCC- RWN B- C Watch Neg

BLOM Bank Caa1 Possible Downgrade - - B- - Watch Neg

Byblos Bank Caa1 Possible Downgrade CCC- RWN - - -

BankMed - - - - B- C Watch Neg

Source: M oody's Investors Service, Fitch Ratings, S&P Global Ratings, Credit Libanais Economic Research Unit

S&P Global Ratings

Lebanese Banks' Latest Ratings

Moody's Investors Service Fitch Ratings

CONTACTS

RESEARCH

Fadlo I. Choueiri, CFA

[email protected]

961-1-608 000 EXT: 1280

Jad Abi Haidar, CFA [email protected] 961-1-608 000 EXT. 1283

Joelle Samaha [email protected] 961-1-608 000 EXT. 1281

Marc Moukarzel [email protected] 961-1-608 000 EXT. 1286

TREASURY & FX

Nabil Aouad

[email protected]

961-1-608 000 EXT. 0789

This document is being furnished to you solely for your information and may not be reproduced or redistributed to any other person. This document does not constitute an offer or invitation to subscribe to or purchase any security, and neither this document nor anything contained herein shall form the basis of

any contract or commitment whatsoever. Reasonable care has been taken to ensure that the facts stated herein are accurate and the estimates, opinions and expectations contained herein are fair and reliable.

Weekly Market Watch

ECONOMIC RESEARCH UNIT - ADLIEH, BEIRUT LEBANON - TEL: 01-608000 FAX: 01-608231 22

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issue no. 664...he conomic r b s lebbaanonn news economic insights redit s&p places lebanon’s...

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