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AdliehBeirut,[email protected]

CREDIT LIBANAIS S.A.L.

WeeklyMarketWatch

IssueNo.586

February3rd–February8th2018

LLEEBBAANNOONN NEWS

ECONOMIC INSIGHTS

> LEBANON RANKS 11TH IN THE WORLD AND 2ND IN THE REGION IN THE 2018 FINANCIAL SECRECY INDEX 1

> LEBANON THINK TANKS AMONG THE TOP IN THE MENA REGION 2 > LEBANON’S ECONOMIC FREEDOM AT A HISTORICAL LOW 3 > LEBANON 1ST IN THE MENA REGION IN EXTERNAL DEBT RETURNS IN

JANUARY 2018 4 > BUDGET DEFICIT NARROWS TO $2.5 BILLION BY OCTOBER 2017 5 > INDUSTRIAL EXPORTS DOWN BY 2.45% Y-O-Y TO $2.25 BILLION BY

NOVEMBER 2017 6 > BALANCE OF PAYMENTS DEFICIT AT $156.5 MILLION IN 2017 7 > WEIGHTED AVERAGE INTEREST RATE ON LBP DEPOSITS AT 6.41% IN

DECEMBER 2017 7 > CONSOLIDATED ASSETS OF FINANCIAL INSTITUTIONS AT $1.53 BILLION

BY END OF 2017 8 > COMBINED ASSETS OF INVESTMENT BANKS AT $5.18 BILLION IN 2017 9 > NUMBER OF BIA PASSENGERS UP BY 9.53% IN 2017 10 MONETARY PERFORMANCE

> MONETARY AGGREGATES 11 > MONEY MARKETS 11

LEBANESE EQUITIES

> LEBANESE EQUITIES & CREDIT LIBANAIS INDICES 12

LEBANON'S ECONOMIC & FINANCIAL SECTOR INDICATORS 14 LEBANON'S RATINGS 15

LEBANON RANKS 11TH IN THE WORLD AND 2ND IN THE REGION IN THE 2018 FINANCIAL SECRECY INDEX

Lebanon ranked 11th in the world and 2nd in the region (only preceded by the UAE) in the 2018 Financial Secrecy Index published by the Tax Justice Network, registering an FSI Value of 644.41. LEBANON THINK TANKS AMONG THE TOP IN THE MENA REGION

The TTCSP of the Lauder Institute at the University of Pennsylvania unveiled that Lebanon hosted the 7th largest number of think tanks in the MENA region in 2017, which reached 27. LEBANON’S ECONOMIC FREEDOM AT A HISTORICAL LOW

Lebanon scored an all-time low of 53.2 in Heritage Foundation’s 2018 Index of Economic Freedom, down from 53.3 in the 2017 index. LEBANON 1ST IN THE MENA REGION IN EXTERNAL DEBT RETURNS IN JANUARY 2018

The return on Lebanon’s external debt stood at 2.79% in January 2018, up from 1.95% in December 2017, comparing to a cumulative return on the country’s external sovereign debt that stood at 5.64% in 2017. BUDGET DEFICIT NARROWS TO $2.5 BILLION BY OCTOBER 2017

Lebanon’s fiscal deficit (Budgetary & Treasury) narrowed to $2.50 billion during the first ten months of 2017, down from $3.33 billion a year before.

TABLE OF CONTENTS

Weekly Market Watch 䩡

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

"BDL" Banque Du Liban "ABL" Association of Banks in Lebanon "MOF" The Lebanese Ministry of

Finance "BOP" Balance of Payment "IMF" The International Monetary Fund "Moody's" Moody's Investors Service "BSE" Beirut Stock Exchange "GDRs" Global Depositary Receipts "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 "CPI" Consumer Price Index "PPI" Producer Price Index "CLASI" Credit Libanais Aggregate Stock Index "CLFI" Credit Libanais Financial Sector Stock Index

"CLCI" Credit Libanais Construction Sector Stock Index “EIU” Economist Intelligence Unit “EOY” End of Year "P/E" Price to Earnings Multiple "P/BV" Price to Book Multiple "YTD" Year to Date "YTD Price Performance" Yield to Date Price Appreciation "LBP" The Lebanese Pound "USD" The United States Dollar "Y-O-Y" Year-on-Year "GDP" Gross Domestic Product "MENA" Middle East and North Africa

SYNOPSIS OF TERMS

Weekly Market Watch

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

LEBANON RANKS 11TH IN THE WORLD AND 2ND IN THE REGION IN THE 2018 FINANCIAL SECRECY INDEX

The Tax Justice Network recently launched its “Financial Secrecy Index 2018”, which assesses the level of financial secrecy and the scale of offshore financial activities in 112 jurisdictions across the globe, and helps track tax havens and illicit financial flows. In details, the Tax Justice Network assigned each jurisdiction a Secrecy Score ranging between 0 and 100 based on 20 indicators, namely: Banking Secrecy, Trust and Foundations Register, Recorded Company Ownership, Other Wealth, Limited Partnership Transparency, Public Company Ownership, Public Company Accounts, Country-by-Country Reporting, Corporate Tax Disclosure, Legal Entity Identifier, Tax Administration Capacity, Consistent Personal Income Tax, Avoids Promoting Tax Evasion, Tax Court Secrecy, Harmful Structures, Public Statistics, Anti-Money Laundering, Automatic Information Exchange, Bilateral Treaties, and International Legal Cooperation. The Financial Secrecy Index (FSI) is then calculated by multiplying the cube of the aforementioned Secrecy Score with the cube root of the Global Scale Weight (i.e. a jurisdiction's share in global financial services exports), and then dividing the result by 100. The jurisdictions are subsequently ranked according to their respective FSI Value. In this context, the Tax Justice Network unveiled that around $21 to $32 trillion of private financial wealth is detained untaxed or barely taxed in tax havens across the globe, with illicit cross-border financial flows aggregating to around $1 to $1.6 trillion per annum. The Tax Justice Network stated, however, that financial secrecy does not only facilitate tax evasion, but also fosters fraud, money laundering, insider dealing, bribery, and other illicit activities. In figures, Switzerland topped once again the list of covered jurisdictions in the 2018 Financial Secrecy Index, with an FSI Value of 1,589.57, followed by the United States (FSI Value: 1,298.47), the Cayman Islands (FSI Value: 1,267.68), Hong Kong (FSI Value: 1,243.68), and Singapore (FSI Value: 1,081.98). Lebanon ranked 11th in the world and 2nd in the region (only preceded by the UAE) in the 2018 Financial Secrecy Index, registering an FSI Value of 644.41. In fact, Lebanon recorded a “very high” Secrecy Score of 72.03 and a relatively low Scale Weight of 0.51%, meaning that the country’s financial services exports represent a meager 0.51% of the world’s total. In a related “Narrative Report on Lebanon”, the Tax Justice Network praised the solidity of the Lebanese offshore financial sector and banking sector, which are considered as exceptionally large compared to countries of similar income levels. The report also reiterated the IMF’s claim that the substantial size of the Lebanese Diaspora, banking secrecy, currency convertibility, and high interest rates constitute the foundation of the Lebanese banking sector. In parallel, the report considered Lebanon’s offshore financial sector as “astonishingly resilient” to the local and regional political and security tensions, mentioning that the sector has been growing by about 12% per year on average since 2006. Concurrently, the report hailed Lebanon’s efforts to more efficiently combat money laundering and terrorism financing, yet urged the concerned authorities to strive for better transparency instead of maintaining high secrecy levels.

LEBANON NEWS

Weekly Market Watch

SOURCE: TAX JUSTICE NETWORK, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 1

Jurisdiction Rank FSI Value Secrecy Score Global Scale Weight

Switzerland 1 1,589.57 76.45 4.50%USA 2 1,298.47 59.83 22.30%Cayman Islands 3 1,267.68 72.28 3.79%Hong Kong 4 1,243.68 71.05 4.17%Singapore 5 1,081.98 67.13 4.58%Luxembourg 6 975.92 58.20 12.13%Germany 7 768.95 59.10 5.17%Taiwan 8 743.38 75.75 0.50%UAE 9 661.15 83.85 0.14%Guernsey 10 658.92 72.45 0.52%Lebanon 11 644.41 72.03 0.51%Panama 12 625.84 76.63 0.27%Japan 13 623.92 60.50 2.24%Bahrain 17 490.71 77.80 0.11%Cyprus 24 404.44 61.25 0.55%Turkey 30 353.89 67.98 0.14%Saudi Arabia 37 278.58 69.88 0.05%

FSI 2018 Results for Selected Jurisdictions

Source: Tax Justice Network, Credit Libanais Economic Research Unit

LEBANON NEWS

Weekly Market Watch

SOURCE: TTCSP - LAUDER INSTITUTE - UNIVERSITY OF PENNSYLVANIA, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 2

LEBANON THINK TANKS AMONG THE TOP IN THE MENA REGION

The Think Tanks and Civil Societies Program (TTCSP) of the Lauder Institute at the University of Pennsylvania recently published its “2017 Global Go to Think Tank Index Report” in which it ranks leading think tanks across the globe in an endeavor to enhance their capability and performance, given their important influence on governments and civil societies. According to the report, the selection and ranking processes take into account a wide plethora of criteria such as the quality, number, and reach of a think tank’s publications, the influence of these publications on policymakers, the usefulness of the information it circulates, the quality and reputation of its staff, its media reputation, its website and digital presence, its ability to curb the gap between policymakers on the one hand, and academic communities and the public on the other hand, only to name a few. In this context, the United States emerged as the country with the largest number of think tanks worldwide in 2017 (1,835), followed, and at quite a distance, by China (512 think tanks), the United Kingdom (444 think tanks), India (293 think tanks), and Germany (225 think tanks). On the local front, the TTCSP of the Lauder Institute at the University of Pennsylvania unveiled that Lebanon hosted the 7th largest number of think tanks in the Middle East and North Africa (MENA) region in 2017 (compared to 9th in 2016), which reached 27 up from 19 in 2016. The following table sheds light on the top think tanks in Lebanon and their respective ranks in specific areas according to the TTCSP of the Lauder Institute at the University of Pennsylvania: Think Tank Category Rank

Top Think Tanks 22Top MENA Think Tanks 3

Best Managed Think Tanks 41Best New Idea or Paradigm Developed by a Think Tank 22

Best Use of Social Media and Networks 26Best Regional Studies Center 8

Al-Zaytouna Centre for Studies and Consultations Top MENA Think Tanks 61

Issam Fares Institute for Public Policy and International Affairs (IFI) Top MENA Think Tanks 67

Rafik Hariri Center for the Middle East Top MENA Think Tanks 90

Top MENA Think Tanks 53Best Independent Think Tanks 140Top MENA Think Tanks 32Top Think Tanks by Area of Research: Top Defense and National Security 65

Top Think Tanks in Lebanon

Source: The Think Tanks and Civil Societies Program (TTCSP) of the Lauder Institute - University of Pennsylvania, Credit Libanais Economic Research Unit

Center for Arab Unity Studies (CAUS)

Lebanese Center for Policy Studies (LCPS)

Carnegie Middle East Center

LEBANON NEWS

Weekly Market Watch

SOURCE: HERITAGE FOUNDATION, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 3

LEBANON’S ECONOMIC FREEDOM AT A HISTORICAL LOW

Heritage Foundation recently published its 24th edition of the Index of Economic Freedom which covers the year 2018 and assesses economic freedom in a total of 180 countries. In detail, the overall index score is calculated based on twelve freedom-related criteria, classified into four categories, whereby each is graded on a scale of 0 (worst) to 100 (best). Scores on these twelve components of economic freedom, which are calculated based on a number of sub-variables, are equally weighted and averaged to produce an overall economic freedom score for each economy. With respect to major findings, the report revealed that, on a global level, economic freedom has improved for the sixth year in a row, with the average economic freedom score rising to 61.1 - an all-time high level in the 24-year history of the index. Moreover, results showed that out of the 180 covered economies, 102 saw an improvement in economic freedom, while 75 recorded a decline and 3 had their scores unchanged in the 2018 index. Also in this vein, 6 countries emerged as “free” (scores above 80), 28 countries as “mostly free” (scores between 70 and 80), 62 countries as “moderately free” (scores between 60 and 70), 63 as “mostly unfree” (scores between 50 and 60), and 21 as “repressed” economies (scores below 50).

In figures, and on a global level, Honk Kong topped the list of countries in the 2018 Index of Economic Freedom (IEF) with an overall score of 90.2, followed by Singapore (score: 88.8) and New Zealand (score: 84.2). Regionally, the United Arab Emirates (UAE) led the list of countries in the Middle East and North Africa (MENA) region in the 2018 IEF, scoring 77.6 and ranking 10th worldwide. The UAE was followed by Qatar (score: 72.6; global rank: 29) and Bahrain (score: 67.7; global rank: 50).

As far as Lebanon is concerned, the country scored an all-time low of 53.2 in the 2018 IEF, down from 53.3 in the 2017 index. This positions Lebanon as the 140th freest economy in the world, compared to 137th in the 2017 index, maintaining its 11th position on the regional level. Also on a regional basis, Lebanon came right behind Egypt (score: 53.4; global rank: 139), yet outperformed each of Iran (score: 50.9; global rank: 156) and Algeria (score: 44.7; global rank: 172). According to the report, Lebanon achieved notable successes on the levels of trade freedom and monetary stability, while its weaknesses lied in the areas of rule of law, labor freedom, and business freedom. The report added that despite its free-market tradition and strong history of private commercial activity, the country’s economy performs weakly due to ongoing fiscal and current-account deficits. Moreover, on the level of “rule of law”, and although the right of private ownership is respected and property registration procedures have been simplified, corruption remains pervasive in government contracts and in taxation and real estate registration with bribes customarily accompanying bureaucratic transactions. In the area of “regulatory efficiency”, the report noted that obstacles to business freedom in Lebanon include overregulation, arbitrary licensing, outdated laws, and high fees. Finally, and on the “open markets” front, the report mentioned that trade is extremely important to Lebanon’s economy, and that government openness to foreign investment is above average; however, continuous regional instability deters investment activity. Furthermore, always according to the report, the Lebanese financial sector is relatively well-developed compared to the region and the state has absolutely no ownership in any commercial bank. Criterion Description Lebanon's

2017 Score Lebanon's 2018 Score

Net Change

Over 2018

MENA Average

Score

World Average

ScoreRule of LawProperty Rights Level of protection of intellectual property 43.8 39.7 -4.1 53.2 52.2Judicial Effectiveness Level of effectiveness of judicial systems 25.3 33.6 8.3 53.7 47.7

Government Integrity Level of corruption in the public and private sector 25.3 20.2 -5.1 46.0 42.6

Government SizeTax Burden Flexibility of tax structure 91.8 91.9 0.1 87.3 76.6Fiscal Health Fiscal performance and debt levels - - - 48.5 67.5Government Spending Total government expenditures 76.1 78.2 2.1 60.2 63.9

Regulatory Efficiency

Business Freedom Time frame, regulatory procedures and cost of opening or closing a business 51.5 48.8 -2.7 69.5 64.9

Labor Freedom Rigidity of labor regulations 49.5 44.2 -5.3 58.6 58.9

Monetary Freedom Degree of inflation and influence of government on certain commodity prices 78.4 81.9 3.5 76.9 76.3

Open MarketsTrade Freedom Extent of tariffs, quotas, restrictive

licensing rules and sanitary regulations 84.4 84.5 0.1 78.4 75.9

Investment Freedom Restrictions on foreign investments 65.0 65.0 0.0 52.9 57.8

Financial Freedom Level of government interference in the private sector, namely the banking sector 50.0 50.0 0.0 52.9 48.6

53.3 53.2 -0.1 61.5 61.1

Source: Heritage Foundation, Credit Libanais Economic Research Unit

Overall 2018 Index of Economic Freedom

Lebanon's Results in the Heritage Foundation 2018 Index of Economic Freedom

0

10

20

30

40

50

60

70

8077.6

72.667.7 64.9 62.2 61.9 61.0 59.6 58.9

53.4 53.2 50.944.7

2018 Index of Economic Freedom Scores in the MENA Region

LEBANON NEWS

Weekly Market Watch

SOURCE: MERRILL LYNCH, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 4

LEBANON 1ST IN THE MENA REGION IN EXTERNAL DEBT RETURNS IN JANUARY 2018

According to the monthly “High Yield & Emerging Market Profiles” report published by Merrill Lynch, the return on Lebanon’s external debt stood at 2.79% in January 2018, up from 1.95% in December 2017, comparing to a cumulative return on the country’s external sovereign debt that stood at 5.64% in 2017. This poises Lebanon to occupy the 1st place among 13 MENA countries included in the external debt EM sovereign bond index in terms of total return, followed by Iraq (2.76%), Jordan (2.42%), and Bahrain (0.83%), only to name a few. It is worth highlighting that these returns are not risk-adjusted, which explains the fact that countries offering high sovereign yields have high Option Adjusted Spreads (OAS) as sketched in the table below, lowering as such the risk adjusted returns. When factoring in all emerging economies in the Merrill Lynch index, however, Venezuela emerged as the best performer with a sovereign return of 19.18%, while Argentina suffered the worst return performance (-2.28%). Moreover, Lebanon registered the highest OAS (411 bps) in the MENA region in January 2018 with the country’s excess return reaching 4.07%, the second highest among surveyed MENA countries, noting that Jordan recorded the highest excess return of 4.49%. Furthermore, the report indicated that option adjusted spreads on Lebanon’s External Sovereign Debt corrected to 411 basis points (bps) in January 2018 down from 482 bps in December 2017 and 527 bps in November of the same year in the aftermath of the sudden temporary resignation of MP Hariri. Concurrently, the weight assigned to Lebanon in Merrill Lynch’s Emerging Markets’ external debt index widened to 2.40% up from 2.29% in the previous month, as captured in the following analysis:

Country Returns (%) MENA Rank OAS (bps) Excess Return (%) MENA Rank

Lebanon 2.79 1 411 4.07 2

Iraq 2.76 2 319 3.95 3

Jordan 2.42 3 326 4.49 1

Bahrain 0.83 4 n.a. 2.34 5

Egypt 0.71 5 318 2.37 4

Tunisia 0.32 6 365 1.39 7

Morocco 0.04 7 106 1.31 8

Oman 0.03 8 264 1.79 6

Turkey -0.46 9 244 1.19 9

U.A.E. -0.61 10 91 1.15 10

Qatar -1.16 11 121 0.41 12

Saudi Arabia -1.17 12 118 0.93 11

Kuwait -1.29 13 76 0.40 13Source: M errill Lynch, Credit Libanais Economic Research Unit

Total Return on Sovereign External Debt in MENA Countries in January 2018

Month of December

2017

Month of January

2018

Full Year 2017

Returns (%) 1.95 2.79 5.64

Excess Return (%) 1.80 4.07 3.91

Option Adjusted Spreads (bps) 482.0 411.0 -

Lebanon's Weight in the Index (%) 2.29 2.40 -Source: M errill Lynch, Credit Libanais Economic Research Unit

Lebanon's Sovereign External Debt

LEBANON NEWS

Weekly Market Watch

SOURCE: MOF, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 5

BUDGET DEFICIT NARROWS TO $2.5 BILLION BY OCTOBER 2017

Lebanon’s fiscal deficit (Budgetary & Treasury) narrowed to $2.50 billion during the first ten months of 2017, down from $3.33 billion a year before. The primary balance (Budget & Treasury), however, registered a surplus of nearly $1.58 billion, in comparison with a much smaller surplus of $571 million by end of October 2016. In detail, government revenues (Budget & Treasury) rose by 13.73% y-o-y to around $9.62 billion, mainly buoyed by some 17.76% hike in tax revenues to about $7.26 billion, which outweighed the 4.28% contraction in non-tax revenues to $1.69 billion. More specifically, miscellaneous tax revenues soared by 30.15% on a yearly basis to circa $4.01 billion and VAT-related revenues increased by 7.35% to around $2.06 billion. Concurrently, government expenditures (Budget & Treasury) (including debt service) expanded by 2.80% annually to just below $12.12 billion by October 2017. In fact, transfers to Electricité Du Liban (EDL) surged by 51.45% to around $1.08 billion as oil prices sustained their upturn, outweighing the 13.41% drop in budget expenditures over previous years to $0.78 billion and the 23.29% plunge in treasury expenditures to $1.40 billion. Furthermore, debt service continued to weigh heavily on the government’s finances and grew by 4.48% y-o-y to $4.07 billion, from $3.90 billion a year earlier. Consequently, the deficit to total expenditures’ ratio dropped significantly to 20.60% as at end of October 2017, from 28.23% in the same period last year.

Public Finance Y-O-Y(USD Million) Oct-2016 Oct-2017 % Change

Revenues 8,458 9,619 13.73%

Expenditures (Including Debt Servicing) 11,785 12,115 2.80%Debt Servicing 3,897 4,072 4.48%

Total Deficit (3,327) (2,496) -24.97%

Total Primary Surplus/ (Deficit) 571 1,576 176.07%

Deficit / Total Expenditures 28.23% 20.60%

For the Ten-Month Period Ending

Source: The Lebanese M inistry o f Finance, Credit Libanais Economic Research Unit

8,4589,619

11,785 12,115

-6,000

-4,000

-2,000

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Oct-2016 Oct-2017

USD Million

Cumulative Budget Deficit

Revenues Expenditures (Including Debt Servicing) Total Deficit

Tax Revenues(75.52%)

•Misc. Tax Revenues (41.68%)

•Customs Revenues (12.42%)

•VAT Revenues (21.41%)

Non-Tax Revenues(17.55%)

Treasury Receipts(6.93%)

•Guarantees (0.52%)

•Municipalities (2.75%)

•Deposits (0.78%)•Other (2.88%)

Breakdownof

Government Revenues

General Exp.(57.50%)

•Electricité Du Liban (8.91%) •Budget Exp. Prev. Years (6.44%)

•Other (42.15%)

Debt Service and Foreign

Debt Repayment(33.61%)

•Interest Payment (32.44%) •Foreign Debt Principal Repayment (1.18%)

Treasury Exp.

(8.89%)

•Guarantees (0.57%)•Municipalities (3.04%)•Deposits (1.19%)•Other (4.10%)

Breakdown of Government Expenditures

LEBANON NEWS

Weekly Market Watch

SOURCE: THE LEBANESE MINISTRY OF INDUSTRY, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 6

INDUSTRIAL EXPORTS DOWN BY 2.45% Y-O-Y TO $2.25 BILLION BY NOVEMBER 2017

According to the Lebanese Ministry of Industry, Lebanon’s industrial exports contracted by 9.53% during the month of November 2017 to $205.1 million, compared to $226.7 million in October. Similarly, on a cumulative basis, industrial exports fell by 2.45% y-o-y to nearly $2.25 billion by the end of the eleven-month period ended in November 2017, down from around $2.31 billion during that same period in 2016. On the other hand, industrial imports increased by 7.63% y-o-y to $234.1 million by November 2017, compared to $217.5 million a year earlier.

Exports of “machinery and electrical equipment” accounted for the bulk ($442.6 million <19.64%>) of the total exports bill, followed by “prepared foodstuffs and tobacco” ($429.7 million <19.06%>) and “products of the chemical industries” ($366.5 million <16.26%>). On the imports front, China led the list of countries exporting to Lebanon ($51.3 million <21.90%>), followed by Italy ($47.1 million <20.13%>) and Germany ($32.0 million <13.69%>) as elaborated in the section below:

Y-O-Y

(USD Million) November-2016 November-2017 % Change

Industrial Exports 2,310.6 2,254.0 -2.45%

Industrial Imports of Equipment & Machinery 217.5 234.1 7.63%Source: Ministry of Industry, Credit Libanais Economic Research Unit

Evolution of Industrial Exports for the Eleven-Month Period Ending

2,100

2,150

2,200

2,250

2,300

2,350

2,400

2,450

2,500

2,550

YTD November 2015 YTD November 2016 YTD November 2017

2,504.8

2,310.6

2,254.0

$ Million

Evolution of Industrial Exports

Source: Ministry of Industry, Credit Libanais Economic Research Unit

190

195

200

205

210

215

220

225

230

235

YTD November 2015 YTD November 2016 YTD November 2017

205.8

217.5

234.1$ Million

Evolution of Industrial Imports of Equipment & Machinery

Source: Ministry of Industry, Credit Libanais Economic Research Unit

Product Value ($ Million)Machinery and Electrical Equipment 442.6Prepared Foodstuffs and Tobacco 429.7Products of the Chemical Industries 366.5Base Metals and Articles of Base Metal 305.7Plastics & Rubbers and Articles Thereof 141.9Others 567.6Total Industrial Exports 2,254.0

Breakdown of Industrial Exports by Product YTD November 2017

Source: M inistry o f Industry, Credit Libanais Economic Research Unit

Country Value ($ Million)China 51.3Italy 47.1Germany 32.0Romania 13.5France 11.1Others 79.0Total Industrial Imports 234.1

Breakdown of Industrial Imports of Equipment & Machinery by Country of Origin YTD November 2017

Source: M inistry o f Industry, Credit Libanais Economic Research Unit

Machinery and Electrical Equipment

19.64%

Prepared Foodstuffs and Tobacco

19.06%

Products of the Chemical Industries

16.26%

Base Metals and Articles of Base Metal

13.56%

Plastics & Rubbers and Articles Thereof

6.30%

Others25.18%

Breakdown of Industrial Exports by Product YTD November 2017

China21.90%

Italy20.13%

Germany13.69%

Romania5.79%

France4.75%

Others33.75%

Breakdown of Imports of Equipment & Machinery by Country YTD November 2017

LEBANON NEWS

Weekly Market Watch

SOURCE: BDL, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 7

BALANCE OF PAYMENTS DEFICIT AT $156.5 MILLION IN 2017

Lebanon’s balance of payments recorded an $853.8 million surplus during the month of December 2017, compared to a monthly surplus of $67.4 million in November and a monthly deficit of $887.8 million in October. December’s surplus can be attributed to the $748 million expansion in the net foreign assets of banks and financial institutions coupled with the $105.8 million rise in the net foreign assets of the Central Bank. However, on a cumulative basis, Lebanon’s balance of payments settled in negative territory, registering a $156.5 million deficit during the year 2017, compared to a surplus of around $1.24 billion in 2016. Said deficit owes to the $1.77 billion contraction in the net foreign assets of banks and financial institutions eclipsing the $1.61 billion increase in the Central Bank’s net foreign assets. WEIGHTED AVERAGE INTEREST RATE ON LBP DEPOSITS AT 6.41% IN DECEMBER 2017

According to BDL statistics, the weighted average interest rate on Lebanese Pound denominated deposits rose to 6.41% during the last month of 2017, up from 5.88% a month earlier and 5.56% in December 2016. This can be explained by the special rate hikes offered by banks since November to dissuade investors from converting their deposits to U.S. Dollar in the wake of P.M. Hariri’s temporary resignation. Similarly, the weighted average interest rate on U.S. Dollar denominated deposits increased to 3.89% in December 2017, from 3.80% in November and 3.52% in December of the previous year. Commercial banks’ discount and lending rate on LBP denominated loans also widened to 8.09% in December, with that on USD denominated loans firming at 7.67%, as elaborated hereunder:

Change in Net Foreign Assets (USD Million)

2016 2017 % Change

At the Central Bank 3,865.9 1,609.3 -58.37%

At Banks & Financial Institutions (2,628.0) (1,767.0) -32.76%

Total 1,237.5 (156.5) -112.64%

For the Year

Source: Banque Du Liban, Credit Libanais Economic Research Unit

-3000

-1500

0

Dec-2011 Dec-2012 Dec-2013 Dec-2014 Dec-2015 Dec-2016 Dec-2017

(1,996.2)

(1,537.0)(1,128.2)

(1,407.6)

(3,354.6)

1,237.5

(156.5)

USD Million

Evolution of the Cumulative Balance of Payments


-1000

-500

0

500

1000

1500

2000

(718.9)

362.6

(287.9)(254.9)

(861.6)

(13.0)

352.1

1,787.8

188.7

(680.2)

453.0

909.8

166.7 341.8

46.3

(320.9)(591.5) (758.0)

100.2

368.3 457.2

(887.8)

67.4

853.8

Monthly Balance of Payments Results

2016 2017

USD Million


LBP USD LBP USD LBP USD

5.56% 3.52% 5.88% 3.80% 6.41% 3.89%

5.93% 3.98% 6.31% 4.25% 6.91% 4.42%

8.23% 7.35% 7.98% 7.32% 8.09% 7.67%

Nove mbe r 2 0 17Inte re st Ra te Le ve ls


De c e mbe r 2 0 17

Discount & Loans Rate

Average Rate on Deposits

Term Savings & Deposits Rate

De c e mbe r 2 0 16

1.92 1.79 1.91 1.76 1.51

2.79 2.64

5.61 5.46 5.44 5.52 5.58 5.56 5.65

7.53 7.25 7.35 7.27 7.09

8.35 8.29

2011 2012 2013 2014 2015 2016 2017

Evolution of LBP Lending & Deposits Yearly Average Rates (%)

Average Yearly Spread LBP Yearly Average Rate on DepositsLBP Discount and Loans Average Yearly Rate

Source: BDL, Credit Libanais Economic Research Unit

4.19 4.26 4.04 3.92 3.93 3.90 3.69

2.84 2.84 2.92 3.03 3.16 3.34 3.65

7.03 7.11 6.96 6.95 7.08 7.25 7.34

2011 2012 2013 2014 2015 2016 2017

Evolution of USD Lending & Deposits Yearly Average Rates (%)

Average Yearly Spread USD Yearly Average Rate on DepositsUSD Discount and Loans Average Yearly Rate


LEBANON NEWS

Weekly Market Watch


CONSOLIDATED ASSETS OF FINANCIAL INSTITUTIONS AT $1.53 BILLION BY END OF 2017

The consolidated balance sheet of financial institutions operating in Lebanon narrowed by LBP 78.13 billion ($51.83 million) during the twelfth month of 2017 to around LBP 2,302.22 billion ($1,527.18 million), down from around 2,380.34 billion ($1,579.00 million) in November. This is mainly attributed to the 12.51% ($76.82 million) monthly contraction in liabilities to the financial sector to LBP 809.66 billion ($537.09 million), which outweighed the 16.38% ($25.48 million) expansion in liabilities to the private sector to LBP 272.92 billion ($181.04 million). On an annual basis, the balance sheet of Lebanese financial institutions soared by 8.33% in 2017, compared to an 18.09% drop in 2016 and a 2.73% increase in 2015. On the lending front, claims on the private sector, which constitute 49.93% of the total assets of financial institutions, rose by 4.98% y-o-y when compared to the LBP 1,094.97 billion ($726.35 million) figure recorded at end of 2016. On the other hand, claims on the public sector fell by 17.56% annually from LBP 206.02 billion ($136.66 million) in December 2016, representing 7.38% of the total balance sheet of Lebanese financial institutions. In a related note, the compounded annual growth rate (CAGR) in the balance sheet of Lebanese financial institutions hit the 5.71% mark over the 2011-2017 period, as sketched in the chart hereunder:

USD Million 2011 2012 2013 2014 2015 2016 2017Y-O-Y % Change

AssetsCash & Banks 426.98 473.90 563.25 578.86 634.95 573.32 500.60 -12.68%Claims on the Private Sector 538.25 637.04 743.67 741.88 945.46 726.35 762.53 4.98%Claims on the Public Sector 106.62 137.51 121.87 368.46 148.22 136.66 112.67 -17.56%Other Assets 22.87 0.04 -2.79 -13.92 -7.56 -26.53 151.38 -670.51%

Total Assets 1,094.72 1,248.48 1,425.99 1,675.29 1,721.06 1,409.80 1,527.18 8.33%LiabilitiesLiabilities to the Private Sector 226.79 217.48 262.07 259.61 434.96 220.05 181.04 -17.73%Liabilities to the Financial Sector 475.73 581.11 669.67 875.05 702.41 575.99 537.09 -6.75%Other Financial Liabilities 16.28 18.30 19.84 20.43 27.25 33.52 207.03 517.55%Capital Accounts 311.51 355.19 395.86 433.59 461.43 468.47 475.80 1.57%Other Liabilities 64.41 76.40 78.55 86.61 95.01 111.77 126.21 12.93%Total Liabilities 1,094.72 1,248.48 1,425.99 1,675.29 1,721.06 1,409.80 1,527.17 8.33%

Financial Institutions Consolidated Balance Sheet


Cash & Banks &

Other Assets42.69%

Claims on the Private

Sector49.93%

Claims on the Public

Sector7.38%

Breakdown of Financial Institutions Balance Sheet as at End of 2017


0

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800

1,000

1,200

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1,800

2011 2012 2013 2014 2015 2016 2017

1,094.721,248.48

1,425.99

1,675.29 1,721.06

1,409.801,527.18

$ Million

Evolution of Financial Institutions' Assets


COMBINED ASSETS OF INVESTMENT BANKS AT $5.18 BILLION IN 2017

According to Banque Du Liban (BDL) statistics, the combined balance sheet of investment banks operating in Lebanon widened by 10.04% during the year 2017 to nearly $5.18 billion, up from around $4.71 billion at end of 2016. This expansion owes primarily to the 17.35% hike in claims on the private sector to just over $1.70 billion, accompanied by some 17.67% rally in claims on the public sector to $828 million. On the liabilities side, private sector deposits fell by 0.48% in 2017 to $2.18 billion, while liabilities to the financial sector soared by 25.08% to $1.10 billion. Investment banks’ capital accounts also rose by 14.57% to $1.56 billion at end of 2017, from $1.36 billion a year before. Abiding by legislative decree number 50 and subsequent BDL circulars, investment banks operating in Lebanon have managed over the last couple of years to increase loans to the private sector at the expense of reducing their exposure to the public sector. As a result, the surplus representing the difference between loans to the private sector and claims on the public sector reached $874 million by December 2017, compared to surpluses of $747 million in the full year 2016, $868 million in 2015, $832 million in 2014, $709 million in 2013, and $419 million in 2012.

LEBANON NEWS

Weekly Market Watch


In Millions of USD 2013 2014 2015 2016 2017 % ChangeCash and Banks 1,922 1,886 2,290 2,172 2,201 1.33%Claims on Private Sector 1,203 1,380 1,389 1,450 1,702 17.35%Claims on Public Sector 493 548 521 704 828 17.67%Other Items 368 301 354 380 448 17.85%Total Assets 3,986 4,114 4,554 4,706 5,179 10.04%

Private Sector Deposits 2,139 2,189 2,357 2,190 2,180 -0.48%Liabilities to the Financial Sector 598 637 723 883 1,104 25.08%Capital Accounts 1,000 1,137 1,236 1,364 1,563 14.57%Other Items 250 151 237 269 332 23.38%Total Liabilities 3,986 4,114 4,554 4,706 5,179 10.04%Source: BDL, Credit Libanais Economic Research Unit

Evolution of Investment Banks' Combined Balance Sheet

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493548 521

704828

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1,702

Investment Banks' Loans to the Private Sector v/s Claims on the Public Sector ($ Million)

Claims on Public Sector Claims on Private Sector

Starting the Year 2010, Investment Banks' Loans to the Private Sector > Claims on the Public Sector in Conformity with BDL's Directives

NUMBER OF BIA PASSENGERS UP BY 9.53% IN 2017

The number of passengers travelling via the Beirut International Airport (BIA) rose by 9.53% in 2017 to 8,235,867, up from 7,519,377 passengers a year before. More specifically, the number of arriving travelers soared by 9.84% y-o-y to 4,103,499, with the number of departing travelers also rallying by 9.34% to 4,127,491. On the other hand, the number of transit travelers plunged by 42.95% on a yearly basis to 4,877, while the number of flights inched slightly higher to 71,169. This is further sketched in the table below:

LEBANON NEWS

Weekly Market Watch

SOURCE: BIA, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 10

Beirut InternationalAirport 2016 2017 % ChangeTotal Passengers 7,519,377 8,235,867 9.53% o/w Arriving Passengers 3,735,980 4,103,499 9.84% o/w Departing Travelers 3,774,848 4,127,491 9.34% o/w Transit Travelers 8,549 4,877 -42.95%Number of Flights 69,944 71,169 1.75%

For the Year

Source: BIA, Credit Libanais Economic Research Unit

- 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

TotalPassengers

ArrivingPassengers

DepartingTravelers

TransitTravelers

8,235,867

4,103,499 4,127,491

4,877

BIA's Passengers in 2017


-

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

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

3,869,607

4,985,499 5,552,746

5,653,969 5,960,414

6,264,368 6,569,469

7,240,3887,519,377

8,235,867

BIA Total Passengers (Cumulative)


MONETARY AGGREGATES

The overall money supply, “M4”, widened by LBP 303.77 billion during the week of January 25, 2018 and by 3.73% on an annual basis to LBP 218,788 billion, noting that the non-banking sector’s Treasury bills portfolio rose by LBP 24 billion.

On the other hand, Lebanese-Pound denominated deposits and currency in circulation, “M1”, fell by LBP 170.46 billion week-on-week to LBP 9,638 billion on the back of some LBP 129 billion contraction in money in circulation, accompanied by a LBP 41 billion drop in demand deposits. On a yearly basis, “M1” also receded by 2.51%. Conversely, local currency term deposits, “M2”, grew by a shy LBP 12.85 billion on a weekly basis, yet plunged by 3.72% year-on-year to settle at LBP 79,153 billion.

Consequently, private sector term and saving deposits denominated in LBP (“M2-M1”) gained some LBP 183.31 billion (0.26%) during the fourth week of January to LBP 69,515 billion, with deposits denominated in foreign currencies (“M3-M2”) increasing by LBP 267.22 billion (0.21%) to LBP 128,777 billion. MONEY MARKETS

The February 01st Treasury bill auction raised LBP 577.281 billion ($382.939 million) compared to LBP 294.588 billion ($195.41 million) in the auction of the previous week.

The majority of subscriptions (51.15%) was concentrated in the three-year to maturity T-bonds, followed by the seven-year (38.16%), and six-month (10.69%) tenure treasury securities.

Consequently, the weighted average yield on Lebanese Pound Treasury bills stood at 6.56% in the auction of February 01. The yields on the six-month, three-year, and seven-year to maturity Treasury securities remained flat at 4.99%, 6.50%, and 7.08% respectively.

MONETARY PERFORMANCE

Weekly Market Watch

SOURCE: BDL, REUTERS, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 11

Lebanese Treasury Bills 3 Months 6 Months 12 Months 24 Months 36 Months 60 Months 84 Months 120 MonthsTreasury Yield 4.44% 4.99% 5.35% 5.84% 6.50% 6.74% 7.08% 7.46%

3 Months

6 Months

12 Months

24 Months

36 Months60 Months

84 Months

120 Months

3.00%

3.50%

4.00%

4.50%

5.00%

5.50%

6.00%

6.50%

7.00%

7.50%

8.00%

0 1 2 3 4 5 6 7 8 9

On The Run Yield Curve

Lebanese Treasury Bills

Yield (%)Face Value (in billions

of LBP)

% of Total Face Value

6 Months 4.99% 61.722 10.69%36 Months 6.50% 295.291 51.15%84 Months 7.08% 220.268 38.16% Total 577.281 100.00%Source: Reuters, Credit Libanais Economic Research Unit

February 01, 2018

Mone y SupplyLBP Billion

M1 9,808 9,638 - 1.74%

M2 79,140 79,153 0.02%

M3 207,650 207,930 0.13%

M4 218,484 218,788 0.14%

M2 - M1 6 9 ,3 3 1 6 9 ,5 15 0 .2 6 %

M3 - M2 12 8 ,5 10 12 8 ,7 7 7 0 .2 1%

Ja nua ry 18 , 2 0 18 Ja nua ry 2 5 , 2 0 18 % Cha nge


150,000

200,000

250,000

January 18,2018

January 25,2018

218,484 218,788207,650 207,930

Money Supply - LBP Billion -

M4 M3


LEBANESE EQUITIES

Beirut Stock Exchange activity was relatively robust this week, boosted by two block trades on Solidere “A” and “B” shares involving in total some 526,540 shares and sizeable traded chunks on Holcim (Liban) shares involving over 1 million stocks. In fact, the total number of shares changing hands contracted to 2,098,627, compared to 2,941,217 shares a week earlier. Concurrently, traded value slightly declined to $26.71 million this week, from around $28.47 million a week earlier. Trades were mainly concentrated in the real estate sector, which accounted for 87.81% of weekly traded volume. The average daily trading volume also narrowed to 524,657 shares this week, from 588,243 shares last week. Conversely, the average daily trading value widened to about $6.68 million, from $5.69 million a week earlier. Six losers and five gainers were spotted this week, dragging the BSE’s market capitalization down by 0.32% week-on-week to around $11.69 billion and the Credit Libanais Aggregate Stock Index (“CLASI”) 0.40% lower to 1,115.02. In the real estate sector, trades mainly consisted of Holcim (Liban) shares (53.03% of total traded volume), with the price of said shares dropping by 5.88% to $14.57, and the price of each of Solidere “A” Solidere “B” decreasing by 0.59% and 1.54% to $8.45 and $8.32 respectively. In this context, the Credit Libanais Construction Sector Stock Index (“CLCI”) ended the week 1.78% lower at 485.04. In the banking sector, Bank Audi GDRs amassed the highest concentration of trades (8.01% of total traded volume) on a very thin turnover ratio of 0.14%. The Credit Libanais Financial Sector Stock Index (“CLFI”) fell by 0.10% on a weekly basis to 1,518.33. This comes as a result of the 1.69% drop in the price of Bank Audi GDRs to $5.80 coupled with the 0.78% depreciation in the price of BLOM Bank GDRs to $12.65, which together outweighed the 1.25% appreciation in the price of Byblos Bank listed shares to $1.62.

LEBANESE EQUITIES

Weekly Market Watch

SOURCE: BSE, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 12

Credit Libanais Week of Week of Weekly YTDIndices 2-Feb-18 8-Feb-18 % Change % ChangeCredit Libanais AggregateStock Index <.CLASI> 1,119.45 1,115.02 -0.40% 2.45%

Credit Libanais FinancialSector Stock Index <.CLFI> 1,519.85 1,518.33 -0.10% 1.83%

Credit Libanais ConstructionSector Stock Index <.CLCI> 493.85 485.04 -1.78% 5.59%

1,000

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Credit Libanais Aggregate Stock IndexWeekly Performance

CLASI

CLASI 0.40%

.CLASI Credit Libanais Aggregate Stock Index

Value Daily % Chng Daily Net Chng

1,115.02 -0.029% -0.32

Yr.High Year Hi.Date Yr.Low Year.Lo.Date

1,130.99 30-Jan-18 1,088.33 2-Jan-18

Life High Life Hi.Date Life Low Life.Lo.Date

1,801.01 7-Jul-08 836.11 25-Mar-09

Thursday, February 08, 2018

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Credit Libanais Financial Sector Stock IndexWeekly Performance

CLFI

CLFI 0.10%

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Credit Libanais Construction Sector Stock IndexWeekly Performance

CLCI

CLCI 1.78%

The market-cap weighted average price to earnings (P/E) and price to book value (P/BV) multiples of listed stocks ended their week lower at 7.420x and 0.808x respectively based on the closing prices of Friday’s session.

LEBANESE EQUITIES

Weekly Market Watch

SOURCE: BSE, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 13

Previous Last % ChangeValue Traded ($) 28,473,581 26,710,651 -6.19%Volume Traded 2,941,217 2,098,627 -28.65%Average Daily Trading Value ($) 5,694,716 6,677,663 17.26%Average Daily Trading Volume 588,243 524,657 -10.81%Market Cap - BSE ($) 11,730,254,802 11,692,743,430 -0.32%Weighted Average P/E 7.472 7.420 -0.70%Weighted Average P/BV 0.814 0.808 -0.68%Source: Beirut Stock Exchange, Credit Libanais Economic Research Unit

Activity Analysis

P/E P/BV

Solidere A $8.45 -0.59% 338,440 16.13% $3,171,659 11.87% 100,000,000 845,000 18.37 0.69 5.49%Solidere B $8.32 -1.54% 342,316 16.31% $3,202,334 11.99% 65,000,000 540,800 18.09 0.68 4.26%BLC Bank $0.93 0.00% - - - - 71,033,333 66,061 5.17 0.51 0.00%BLC Bank Preferred Class "B" $100.00 0.00% - - - - 550,000 55,000 n.a n.a 0.00%BLC Bank Preferred Class "C" $100.00 0.00% - - - - 350,000 35,000 n.a n.a 0.00%BLC Bank Preferred Class "D" $101.00 0.00% 200 0.01% $20,200 0.08% 750,000 75,750 n.a n.a 1.00%Bank Audi - Listed Shares $5.90 0.00% 160 0.01% $944 0.00% 399,749,204 2,358,520 4.65 0.74 2.61%Bank Audi GDR $5.80 -1.69% 168,164 8.01% $976,956 3.66% 119,924,761 695,564 4.57 0.73 -0.68%Bank Audi Preferred "G" $100.30 0.00% - - - - 1,500,000 150,450 n.a n.a 0.00%Bank Audi Preferred "H" $100.00 0.00% - - - - 750,000 75,000 n.a n.a -0.60%Bank Audi Preferred "I" $99.95 -0.05% 6,000 0.29% $599,700 2.25% 2,500,000 249,875 n.a n.a 0.00%Bank Audi Preferred "J" $99.95 0.00% 12,655 0.60% $1,264,420 4.73% 2,750,000 274,863 n.a n.a 0.00%Bank Of Beirut - Listed Shares $18.80 0.00% - - - - 17,746,417 333,633 8.83 1.06 0.00%Bank Of Beirut Priority Shares 2014 $21.00 0.00% - - - - 4,762,000 100,002 9.86 1.18 0.00%Bank Of Beirut Preferred "H" $25.90 0.00% - - - - 5,400,000 139,860 n.a n.a 0.00%Bank Of Beirut Preferred "I" $26.00 0.58% 19,230 0.92% $499,980 1.87% 5,000,000 130,000 n.a n.a 1.96%Bank Of Beirut Preferred "J" $26.00 0.58% 3,065 0.15% $79,690 0.30% 3,000,000 78,000 n.a n.a 1.36%Bank Of Beirut Preferred "K" $25.75 0.00% - - - - 4,000,000 103,000 n.a n.a 1.58%Byblos Bank - Listed Shares $1.62 1.25% 10,500 0.50% $16,810 0.06% 565,515,040 916,134 6.75 0.63 1.25%Byblos Bank Preferred Class 2008 $102.10 0.00% - - - - 2,000,000 204,200 n.a n.a 0.49%Byblos Bank Preferred Class 2009 $103.00 0.00% - - - - 2,000,000 206,000 n.a n.a 1.98%Byblos Bank GDR $80.50 0.00% - - - - 1,309,078 105,381 6.71 0.63 3.60%BEMO Bank - Listed Shares $1.17 0.00% - - - - 51,400,000 60,138 4.50 0.52 -10.00%BEMO Bank Preferred Class 2013 $104.00 0.68% 1,000 0.05% $104,000 0.39% 350,000 36,400 n.a n.a 0.68%BLOM Bank GDR $12.65 -0.78% 15,900 0.76% $201,775 0.76% 73,896,010 934,785 5.80 0.92 -0.39%BLOM Bank Listed Shares $12.00 0.00% 19,000 0.91% $228,000 0.85% 215,000,000 2,580,000 5.50 0.87 3.09%RYMCO Class "B" $3.25 0.00% - - - - 10,920,000 35,490 14.77 1.67 0.00%Holcim Liban $14.57 -5.88% 1,112,993 53.03% $16,216,282 60.71% 19,516,040 284,349 7.47 1.41 0.76%Ciment Blancs Nominal $2.61 1.95% 49,004 2.34% $127,900 0.48% 9,000,000 23,490 6.87 1.14 16.00%

Lebanese Equities

Source: Beirut Stock Exchange, Credit Libanais Economic Research Unit

YTD Price Perf.

Note: n.a stands for not applicable

Market Capitalisation

($000)BEIRUT STOCK EXCHANGE

Weekly Value Traded

ClosingWeekly

%Change

Weekly Volume Traded

% of Weekly Volume Traded

% of Weekly Value Traded

Total Listed Shares

Source: BSE, Credit Libanais Economic Research Unit

0

2

4

6

8

Feb 2, 2018 Feb 8, 2018

7.472 7.420

0.814 0.808

Evolution of Beirut Bourse Comparable Benchmarks

P/E P/BV

Weekly Market Watch

SOURCE: CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 14

LEBANON’S MAIN INDICATORS

20 11 2 0 12 2 0 13 20 14 2 0 15 2 0 16 2 0 17 20 18

MACROECONOMIC INDICATORS

GDP (Current Prices) ($ Billion) 40.08 43.87 46.01 47.83 49.46 50.46 52.70* 55.02*

Real GDP Growth Rate 0.92% 2.80% 2.64% 2.00% 0.82% 1.00% 1.50%* 2.00%*

GDP per Capita (Current Prices) ($) 9,144 9,914 10,399 10,810 11,178 11,295 11,684* 12,082*

Foreign Direct Investment Inflows ($ Billion) 3.14 3.11 2.66 2.91 2.35 2.56

FDI/GDP Ratio 7.84% 7.09% 5.78% 5.84% 4.71% 5.13%

INDUS TRY

Industrial Exports ($ Million) 3,530 3,567 3,384 3,150 2,956 2,527 2,048.9 (3)

Import of Industrial Machinery ($ Million) 239 288 300 269 234 236 216.5 (3)

TOURISM

Total Number of Tourists 1,655,051 1,365,845 1,274,362 1,354,647 1,517,927 1,688,357 1,856,795 (5)

Growth in Tax- Free Spending 10% - 6% 4% 8% 2% - 9% 5% (5)

REAL ESTATE

Value of Real Estate Transactions ($ Million) 8,841 9,175 8,708 8,952 8,006 8,482 9,954 (5)

Number of Real Estate Sales Transactions 82,984 74,569 69,198 70,721 63,386 64,248 73,541 (5)

Construction Permits (000 sqm) 13,890 12,362 10,527 11,159 10,294 9,935 9,271 (5)

Cement Delivery (000 tons) 5,550 5,309 5,831 5,517 5,043 5,265 4,722 (4)

TRANSP ORTATION

Beirut Port: Freight Activity (000 Tons) 6,677 7,225 8,268 8,281 7,240 8,737 8,629 (5)

Beirut Airport: Number of Passengers (million) 5.65 5.96 6.26 6.57 8.22 7.61 7.61 (4)

FOREIGN TRADE

Imports ($ Million) 20,158 21,280 21,228 20,494 18,069 18,705 23,130 (5)

Exports ($ Million) 4,265 4,483 3,936 3,313 2,952 2,977 2,844 (5)

Trade Balance ($ Million) (15,893) (16,797) (17,292) (17,181) (15,117) (15,729) (20,287) (5)

BALANCE OF PAY MENTS

Net Foreign Assets at the Financial Sector ($ Million) (1,996) (1,537) (1,127) (1,407) (3,354) 1,238 (1,010) (4)

Foreign Assets at BDL ($ Billion) 32.24 35.74 35.29 37.86 37.09 40.71 41.99 42.95 (7)

Gold Reserves at BDL ($ Billion) 14.40 15.31 11.10 10.95 9.85 10.71 11.96 12.39 (7)

P UBLIC FINANCE

Government Expenditures ($ Million) 11,675 13,321 13,640 13,952 13,528 14,867 10,409 (2)

Government Revenues ($ Million) 9,333 9,396 9,420 10,879 9,576 9,923 8,405 (2)

Budget Primary Defic it / Surplus ($ Million) 1,662 (110) (240) 1,307 724 21 1,629 (2)

Total Defic it ($ Million) (2,342) (3,925) (4,220) (3,073) (3,952) (4,944) (2,003) (2)

Defic it / GDP Ratio 5.84% 8.95% 9.17% 6.16% 7.78% 9.54%

Debt Service / GDP Ratio 9.99% 8.25% 8.24% 8.78% 9.21% 9.58%

Net Public Debt ($ Billion) 46.35 49.12 53.18 57.30 61.54 65.42 69.77 (4)

Gross Public Debt/GDP Ratio 133.89% 131.49% 137.95% 139.16% 142.18% 148.72%* 152.29%*

MONETARY AGGREGATES & INFLATION

M4 ($ Billion) 103.50 110.00 117.41 124.53 131.17 139.20 145.16 144.93 (6)

(M2- M1) ($ Billion) 35.82 39.32 40.56 43.27 46.25 47.95 45.45 45.99 (6)

Monetization Level (M2/GDP Ratio) 99.32% 99.97% 98.97% 97.40% 102.46% 105.06%

Change in CPI (%) 4.27% 4.68% 2.05% - 1.66% - 3.40% 3.14% 5.01% (5)

BANKING SY STEM

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

Number of Branches 948 962 985 1,020 1,039 1,056 1,057 (1)

Total Assets ($ Million) 140,576 151,883 164,821 175,697 185,989 204,311 216,208 (4)

Total Deposits ($ Million) 117,703 127,657 139,166 147,637 154,951 166,446 171,004 (4)

Loans to the Private Sector ($ Million) 39,375 43,452 47,381 50,899 54,224 57,180 59,548 (4)

Customer Loans/ Deposits 33.45% 34.04% 34.05% 34.48% 34.99% 34.35% 34.82% (4)

Dollarization Rate 65.92% 64.82% 66.14% 65.71% 64.88% 65.82% 68.51% (4)

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 June, 2017, (2) As at End of September, 2017, (3) As at End of October, 2017, (4) As at End o f November, 2017, (5) As at End o f December, 2017, (6) As at 18 January, 2018, (7) As at End of January, 2018

* Figures Reflect IM F Estimates

LEBANON’S RATINGS

Rating Agency Tenor Rating

Long- Te rm B-

Short- Te rm B

Moody's Inve stors Se rvic e Long- Te rm B3

Long- Te rm B-

Short- Te rm B

Source: Fitch Ratings, M oody's Investors Service, S&P Global Ratings

Sta ble

Republic Of Lebanon Sovereign Ratings

Outlook

Sta nda rd & Poor's Globa l Ra tings

Fitc h Ra tings

Sta ble

Sta ble

Rated Banks

Long Term Foreign Currency

Outlook Long Term

IDR

Outlook Long-Term Counterparty Credit Rating

Short-Term Counterparty Credit Rating

Outlook

Bank Audi B3 Stable B- Stable B- C Stable

BLOM Bank B3 Stable - - B- - Stable

Byblos Bank B3 Stable B- Stable - - -

BankMed - - - - B- C Stable

Moody's Investors Service Fitch Ratings

Source: Fitch Ratings, M oody's Investors Service, S&P Global Ratings

S&P Global Ratings

Lebanese Banks' Latest Ratings

Weekly Market Watch

SOURCE: FITCH, MOODY’S, S&P RATINGS, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 15

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 Mayda Zaarour [email protected] 961-1-608 000 EXT. 1282

Nagham Abdel Ahad [email protected] 961-1-608 000 EXT. 1284

MONEY MARKETS DESK

Robert Araman

[email protected]

961-1-608 000 EXT. 0760

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Weekly Market Watch

ECONOMIC RESEARCH UNIT - ADLIEH, BEIRUT LEBANON - TEL: 01-608000 FAX: 01-608231 16

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