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Lebanon Weekly Monitor LEBANON WEEKLY MONITOR JANUARY 18 - JANUARY 24, 2021 WEEK 04 Economy ____________________________________________________________________________ p.2 US$ 246 MILLION FROM WORLD BANK TO SUPPORT VULNERABLE LEBANESE HOUSEHOLDS AND US$ 34 MILLION TO BACK LEBANON’S VACCINATION DRIVE CONTACTS The World Bank Group’s Board of Executive Directors approved last week a US$246 million new project Treasury & Capital Markets to provide emergency cash transfers and access to social services to approximately 786,000 poor and vulnerable Lebanese reeling under the pressure of Lebanon’s economic and COVID-19 crises. Bechara Serhal (961-1) 977421 Also in this issue [email protected] p.3 Documentary L/Cs opened to finance trading activities down by 94% in first eleven months Private Banking p.4 De-taxed touristic spending down by a yearly 68% in 2020 Toufic Aouad Surveys (961-1) 954922 ____________________________________________________________________________ [email protected] p.5 OCCUPANCY OF LEBANON’S FOUR AND FIVE STAR HOTELS AT 16% IN FIRST 11 MONTHS Corporate Banking OF 2020, AS PER EY Ernst & Young issued its latest Hotel Benchmark Survey on the Middle East for the first 11 months Carol Ayat of 2020 (four and five star hotels), in which it showed that the performance of Lebanon’s hospitality (961-1) 959675 sector witnessed a sharp contraction in occupancy rates, average room rates and room yields. [email protected] Also in this issue p.6 Lebanon is regionally uncompetitive with regard to labor market risks, as per Fitch Solutions Corporate News ____________________________________________________________________________ p.7 BANK AUDI AND FIRST ABU DHABI BANK SIGN DEFINITIVE AGREEMENT FOR THE ACQUISITION OF BANK AUDI’S SUBSIDIARY IN EGYPT Bank Audi sal and First Abu Dhabi Bank (FAB) announced the signing of a definitive agreement for the acquisition by FAB of 100% of the share capital of Bank Audi sae, Bank Audi’s subsidiary in Egypt. Also in this issue RESEARCH p.7 BLOM Bank signs definitive agreement to the sale of its stake in BLOM Bank Egypt SAE to Arab Banking Corporation Marwan Barakat (961-1) 977409 p.8 Beirut Port inks accord with French firm over reprocessing debris [email protected] Markets In Brief Jamil Naayem ____________________________________________________________________________ (961-1) 977406 p.9 MARKETS IN BRIEF: INITIATIVES TO REVIVE GOVERNMENT TALKS FAIL TO CURB MARKET [email protected] COLLAPSE Amid efforts to revive the stalled government formation talks and along a nationwide Coronavirus-related Salma Saad Baba lockdown, Lebanon’s capital markets saw this week some fluctuations in the LP/US$ exchange rate on the (961-1) 977346 [email protected] black FX market and extended price falls on the bond market, while the Beirut Stock Exchange remained closed throughout the week. In details, the LP/US$ rate initiated the week at LP/US$ 8,650-LP/US$ 8,700, yet fell to LP/US$ 8,775 and LP/US$ 8,825 on Friday on fading hopes to make a cabinet breakthrough. Fadi Kanso (961-1) 977470 This compared to a rate of LP/US$ 8,900-LP/US$ 8,950 the week before. Concurrently, BDL’s foreign assets [email protected] remained on the decline, falling to US$ 23.7 billion mid-January 2021. In parallel, the Eurobond market pursued its downward trajectory despite efforts to resolve cabinet crisis, with prices of sovereigns ranging Farah Nahlawi between 12.50 cents per US dollar and 13.38 cents per US dollar on Friday. Finally, total resident deposits (961-1) 959747 started the year 2021 with further contractions, while the currency in circulation crossed above the LP 30,000 [email protected] billion threshold for the first time ever. LEBANON MARKETS: WEEK OF JANUARY 18 - JANUARY 24, 2021 Money Market BSE Equity Market LP Tbs Market Eurobond Market LP Exchange Market CDS Market ⬌ ⬌⬇- Week 04 January 18 - January 24, 2021 ⬌⬆ 1 Bank Audi sal - Group Research Department - Bank Audi Plaza - Bab Idriss - PO Box 11-2560 - Lebanon - Tel: 961 1 994 000 - email: [email protected] JANUARY 18 - JANUARY 24, 2021 WEEK 04 ECONOMY ______________________________________________________________________________ US$ 246 MILLION FROM WORLD BANK TO SUPPORT VULNERABLE LEBANESE HOUSEHOLDS AND US$ 34 MILLION TO BACK LEBANON’S VACCINATION DRIVE The World Bank Group’s Board of Executive Directors approved last week a 246 US$ million new project to provide emergency cash transfers and access to social services to approximately 786,000 poor and vulnerable Lebanese reeling under the pressure of Lebanon’s economic and COVID-19 crises. The Emergency Crisis and COVID-19 Response Social Safety Net Project (ESSN) will also support the development of a comprehensive national social safety nets system to allow a better response to ongoing and future shocks. The ESSN project will provide 147,000 extreme poor Lebanese households (approximately 786,000 individuals) with cash assistance for one year. Eligible households will receive a monthly transfer of LBP 100,000 per household member, in addition to a flat amount of LBP 200,000 per household. The transfer value per household will be uploaded monthly onto a pre-paid card issued by a financial service provider and distributed to beneficiary households who can cash out the amount at automated teller machines, or use it to make electronic payments for purchases in a network of food shops. Furthermore, 87,000 children between the ages of 13-18 year will receive a top-up cash transfer to cover the direct costs of schooling including school registration fees, parents’ council fees, school textbooks costs, transport and school uniform expenses, and computer equipment and/or internet connectivity to enable remote learning. School fees will be paid directly to the respective schools. The ESSN will scale-up and enhance Lebanon’s National Poverty Targeting Program (NPTP) launched in 2011 with support from the World Bank. Like the NPTP, the ESSN will adopt the Proxy Means Testing (PMT) targeting methodology to identify eligible beneficiary households across all Lebanese territories, as well as categorical targeting to prioritize socially vulnerable groups. The PMT methodology assesses households’ eligibility depending on a poverty score calculated based on their wealth, assets, demographic characteristics that are correlated with poverty. All potential beneficiaries will be assessed and verified before being declared eligible for assistance. The ESSN will also support increased access to quality social services provided by the Social Development Centers of the Ministry of Social Affairs for 100,000 individuals from poor and vulnerable households, and will provide social workers at the Ministry and centers’ levels with capacity building activities to enable them to better carry out their functions. The ESSN project will adopt a robust Grievance Redress Mechanism to ensure queries and complaints are resolved in a prompt, efficient and transparent manner. An independent Third-Party Monitoring Agent will be recruited to verify eligibility and to confirm that payments have been duly made to end beneficiaries. Furthermore, an Expert Advisory Group composed of local experts from academia, think- tanks, and civil society in the fields of poverty and social policy will be established to provide guidance to the ESSN technical committee and ensure continuous engagement with stakeholders. Finally, the World Bank said last week it had approved a re-allocation of US$ 34 million in funds to support Lebanon’s vaccination efforts as it races to contain the coronavirus pandemic, marking the first such outlay of funds by the Bank. Week 04 January 18 - January 24, 2021 2 JANUARY 18 - JANUARY 24, 2021 WEEK 04 _____________________________________________________________________________ DOCUMENTARY L/CS OPENED TO FINANCE FOREIGN TRADING ACTIVITIES DOWN BY 94% IN FIRST ELEVEN MONTHS Opened letters of credit (L/Cs) to finance import and export activities, a measurement tool for foreign trade activity, went down significantly by 93.8% year-on-year over the first eleven months of 2020, to reach US$ 519 million during that period, from US$ 8,394 million a year ago, as per the latest statistics released by the Central Bank of Lebanon. In details, documentary L/Cs opened to finance imports activities contracted by 94.0% on an annual basis to reach US$ 335 million over the period. Alongside, utilized credits for imports fell by 92.0% to US$ 427 million. Inward bills for collection, another documentary credit form of financing (backed by invoices), fell by 65.4% over the first eleven months of 2020 to reach US$ 273 million, from US$ 787 million a year ago. In a related note, documentary L/Cs opened to finance exports activities went down by 93.5% on a yearly basis to reach US$ 184 million over the first eleven months of 2020. In parallel, utilized credits to finance exports contracted by 85.5% to US$ 399 million. Alongside, the value of outward bills sank by 70.5% annually to US$ 255 million over the same period. DOCUMENTARY CREDITS FOR IMPORTS' FINANCING (US$ million) 11M-19 11M-20 11M/11M Documentary L/Cs Opened credits 5,565 335 -94.0% Utilized credits 5,344 427 -92.0% Outstanding credits 555 86 -84.5% Bills for collection Inward bills 787 273 -65.4% Outstanding bills 59 42 -28.6% Sources: BDL, Bank Audi's Group Research Department DOCUMENTARY CREDITS FOR EXPORTS' FINANCING (US$ million) 11M-19 11M-20 11M/11M Documentary L/Cs Opened credits 2,829 184 -93.5% Utilized credits 2,756 399 -85.5% Outstanding credits 663 167 -74.9% Bills for collection Outward bills 865 255 -70.5% Outstanding bills 310 213 -31.2% Sources: BDL, Bank Audi's Group Research Department Week 04 January 18 - January 24, 2021 3 JANUARY 18 - JANUARY 24, 2021 WEEK 04 _____________________________________________________________________________ DE-TAXED TOURISTIC SPENDING DOWN BY A YEARLY 68% IN 2020 As per Global Blue, the firm that reimburses VAT to tourists at Lebanese border points i.e, purchases by tourists in Lebanon whose VAT was claimed and which gives a fait view about tourists’ shopping trends, has contracted by 68% during 2020 compared to 2019.
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