Business conditions in Lebanon’s private sector fell to a seven-month low in August from a 10-year high in July, as output and new orders declined.
The downturn follows two consecutive months of the headline survey being in expansionary territory as the country endures its worst economic crisis since its independence.
Lebanon's Blom purchasing managers’ index, a measure of the strength of the country’s private sector economy, fell to 48.7 in August from 50.3 in July, sliding into contraction territory.
The contraction was the fastest in six months, dragged down by challenging domestic conditions that dented output volumes.
A reading above 50 indicates an expansion in business conditions, while one below represents a contraction.
"This contraction was precipitated by a simultaneous decrease in output and new orders, while employment stabilised," said Stephanie Aoun, research analyst at Blominvest Bank
"The Lebanese economy heavily relied on tourism and expats activity and it seems that in August 2023, there was a drop in summer engagement activity."
Softer demand drove business activity lower in August, marking the first contraction in new orders for three months, with the decline of a similar strength to that seen for output.
New work intakes were adversely affected by political and economic uncertainty, with new export business declining for the first time since March.
Lebanon has been without a president since the end of October 2022, when the six-year term of Michel Aoun ended. It is being run by a caretaker cabinet led by Prime Minister Najib Mikati, with limited powers.
The election of a president requires the consensus of the country's political elite.
Political vacuums have stalled Lebanon's economic progress and the existing one is salient because it threatens the enactment of reforms deemed necessary for the nation to emerge from its worst financial crisis.
"As the Lebanese economy navigates these turbulent waters, it's concerning to note that the absence of substantial economic reforms continues to cast a shadow," said Ms Aoun.
"Without meaningful changes, Lebanon's trajectory remains uncertain, underscoring the pressing need for impactful reforms to steer the nation towards a more promising economic future.”
The World Bank has dubbed Lebanon's economic meltdown as among the world's worst since the 1850s.
PMI survey respondents cited exchange rate fluctuations that drove input costs higher, prompting businesses to lift their charges. The Lebanese pound has lost more than 90 per cent of its value and inflation has soared after the central bank devalued the currency in February.
The official exchange rate changed to 15,000 pounds to the US dollar, compared with the peg in place since 1997 of 1,507.50 to the dollar.
Despite the decline in the PMI index, the survey found there was "a marked improvement in business sentiment in August as firms became less pessimistic in their assessment of year-ahead prospects for business activity". The survey's Future Output Index rose to its highest level since March 2020.
Our family matters legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
'THE WORST THING YOU CAN EAT'
Trans fat is typically found in fried and baked goods, but you may be consuming more than you think.
Powdered coffee creamer, microwave popcorn and virtually anything processed with a crust is likely to contain it, as this guide from Mayo Clinic outlines:
Baked goods - Most cakes, cookies, pie crusts and crackers contain shortening, which is usually made from partially hydrogenated vegetable oil. Ready-made frosting is another source of trans fat.
Snacks - Potato, corn and tortilla chips often contain trans fat. And while popcorn can be a healthy snack, many types of packaged or microwave popcorn use trans fat to help cook or flavour the popcorn.
Fried food - Foods that require deep frying — french fries, doughnuts and fried chicken — can contain trans fat from the oil used in the cooking process.
Refrigerator dough - Products such as canned biscuits and cinnamon rolls often contain trans fat, as do frozen pizza crusts.
Creamer and margarine - Nondairy coffee creamer and stick margarines also may contain partially hydrogenated vegetable oils.
COMPANY%20PROFILE
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Key changes
Commission caps
For life insurance products with a savings component, Peter Hodgins of Clyde & Co said different caps apply to the saving and protection elements:
• For the saving component, a cap of 4.5 per cent of the annualised premium per year (which may not exceed 90 per cent of the annualised premium over the policy term).
• On the protection component, there is a cap of 10 per cent of the annualised premium per year (which may not exceed 160 per cent of the annualised premium over the policy term).
• Indemnity commission, the amount of commission that can be advanced to a product salesperson, can be 50 per cent of the annualised premium for the first year or 50 per cent of the total commissions on the policy calculated.
• The remaining commission after deduction of the indemnity commission is paid equally over the premium payment term.
• For pure protection products, which only offer a life insurance component, the maximum commission will be 10 per cent of the annualised premium multiplied by the length of the policy in years.
Disclosure
Customers must now be provided with a full illustration of the product they are buying to ensure they understand the potential returns on savings products as well as the effects of any charges. There is also a “free-look” period of 30 days, where insurers must provide a full refund if the buyer wishes to cancel the policy.
“The illustration should provide for at least two scenarios to illustrate the performance of the product,” said Mr Hodgins. “All illustrations are required to be signed by the customer.”
Another illustration must outline surrender charges to ensure they understand the costs of exiting a fixed-term product early.
Illustrations must also be kept updatedand insurers must provide information on the top five investment funds available annually, including at least five years' performance data.
“This may be segregated based on the risk appetite of the customer (in which case, the top five funds for each segment must be provided),” said Mr Hodgins.
Product providers must also disclose the ratio of protection benefit to savings benefits. If a protection benefit ratio is less than 10 per cent "the product must carry a warning stating that it has limited or no protection benefit" Mr Hodgins added.
RESULTS
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PROFILE OF HALAN
Started: November 2017
Founders: Mounir Nakhla, Ahmed Mohsen and Mohamed Aboulnaga
Based: Cairo, Egypt
Sector: transport and logistics
Size: 150 employees
Investment: approximately $8 million
Investors include: Singapore’s Battery Road Digital Holdings, Egypt’s Algebra Ventures, Uber co-founder and former CTO Oscar Salazar
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Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
