Lebanon's summer season affected by Syria and Hezbollah’s 'intransigence,' according to latest PMI

BEIRUT — The PMI index fell slightly to 48.9 in July, down 0.3 points from June, reflecting weaker business sentiment among 400 Lebanese firms surveyed by Blominvest.

This decline comes amid persistent crisis and political and security uncertainties, yet it has not discouraged some members of the diaspora from vacationing in their country.

"This result was not unexpected; the economy lacks any real demand stimulus: the government cannot afford to spend, and the private sector neither has the capacity nor the willingness to do so," analyzes Blominvest chief economist Ali Bolbol in the press release published with the index update.

He adds that the tourism season, although partially salvaged by the unexpected halt of the war launched by Israel against Iran at the end of June, remains "mediocre," and that Lebanese companies are posting "mixed" export results.

The reasons: "an unstable security situation, worsened by Hezbollah’s intransigence in refusing to give up its arms and by violence in Syria." This refers to the issue of restoring the state monopoly on arms, which faces resistance from Hezbollah despite U.S. pressure, as well as sectarian clashes in Syria. Israel, meanwhile, continues to bomb southern Lebanon and, at times, other areas of the country, despite the cease-fire reached with Hezbollah at the end of last November.

"The only good news is that the economic repercussions could have been worse, which offers a glimmer of hope regarding the economy’s flexibility and potential," adds Bolbol.

The index has fluctuated less than two points below the 50 mark since April, reflecting a slight slowdown in economic activity and overall bleak prospects. Above 50, the PMI instead signals an expansion of activity. The fact that July’s index fell compared to June’s indicates a worsening perception of the situation among those surveyed.

It has now been five months since the PMI has stayed below the 50-point threshold. The sub-index measuring output remained stuck at 48 points, while the sub-index for new orders lost half a point to settle at 47.8.

As for the sub-index for new export orders, it dropped by more than two points, reaching 45.6, its worst performance since Nawaf Salam’s government was formed last February.