LEBANON WEEKLY MONITOR MAY 31 - JUNE 6, 2021 WEEK 23 Economy ____________________________________________________________________________ p.2 A 38% DROP IN AVERAGE BDL COINCIDENT INDICATOR IN 2020 BDL’s coincident indicator, a cyclical indicator for Lebanon’s economic activity and which aggregates CONTACTS a number of real sector indicators, has reported 173.9 in December 2020, or an average of 180.2 in the Treasury & Capital Markets year 2020, contracting by 38.4% relative to the year 2019. Bechara Serhal Also in this issue (961-1) 977421 p.3 Merchandise at Port of Beirut up by 13% in first four months of 2021 [email protected] p.3 Value of cleared checks down by 22% in the first five months of 2021 Private Banking p.4 Tripoli Port revenues improve by 158% year-on-year in March 2021 Toufic Aouad (961-1) 954922 Surveys ____________________________________________________________________________ [email protected] p.5 LEBANON'S FINANCIAL CRISIS LIKELY TO RANK IN THE TOP 10, POSSIBLY THREE, MOST Corporate Banking SEVERE CRISES EPISODES GLOBALLY SINCE 1900, AS PER THE WORLD BANK The World Bank recently issued its Lebanon Economic Monitor which provides an update on key Carol Ayat economic developments and policies over the past six months. (961-1) 959675 [email protected] Also in this issue Marketing and Communications p.6 Lebanon is regionally uncompetitive with regard to labor market risks due to a host of issues, as per Fitch Solutions Jean Traboulsi (961- 1) 977350 [email protected] Corporate News ____________________________________________________________________________ p.7 BLC BANK’S NET PROFITS AT US$ 2.7 MILLION IN THE FIRST QUARTER OF 2021 BLC Bank announced net profits of US$ 2.7 million in 1Q 2021, according to its latest release. Net interest income reached US$ 25.3 million in 1Q 2021, as per a statement by the bank. Also in this issue RESEARCH p.7 Sputnik V vaccine to be produced locally by Arwan p.8 Cedar Oxygen approved 22 grants valued at US$ 45 million Marwan Barakat p.8 Glenbey first Scotch bottled and finalized locally (961-1) 977409 p.8 TerraTrue start-up fundraised US$ 15 million in Series A [email protected] Salma Saad Baba Markets In Brief ____________________________________________________________________________ (961-1) 977346 [email protected] p.9 MARKETS IN BRIEF: LP DOWN BY 4% AGAINST US DOLLAR ON BLACK FX MARKET AMID RISING POLITICAL TENSIONS OVER CABINET Farah Nahlawi Amid deepened monthslong cabinet crisis and calls to make a breakthrough in the cabinet formation process (961-1) 959747 to secure international aid and pave the way for long-overdue reforms, and with the start of FX activity on [email protected] the new “Sayrafa” platform while BDL’s FX reserves continued their nosedive, Lebanon’s capital markets saw this week a deterioration in the LP rate against the US dollar on the black FX market, while the equity and Zeina Labban bond markets registered shy price declines. In details, the LP/US$ rate rose by 4% this week, reaching LP/US$ (961-1) 952426 13,450-LP/US$ 13,500 on Friday, while BDL’s liquid FX reserves fell below the US$ 16 billion level, which is [email protected] merely equivalent to banks’ FX required reserves at BDL. Within this context, it is worth mentioning that total FX operations on “Sayrafa” amounted to US$ 10 million this week, at a rate of LP/US$ 12,200. On the bond Michele Sakha market, activity was mostly skewed to the downside in relatively light volumes, while prices ranged between (961-1) 977102 12.63 and 14.0 cents per US dollar on Friday. On the equity market, the BSE registered shy price retreats of [email protected] 0.3%, while the total turnover contracted by 20% week-on-week. LEBANON MARKETS: MAY 31 - JUNE 6, 2021 Money Market BSE Equity Market LP Tbs Market Eurobond Market ⬇ LP Exchange Market CDS Market - ⬌⬆ ⬇ Week 23 May 31 - June 6, 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] MAY 31 - JUNE 6, 2021 WEEK 23 ECONOMY ______________________________________________________________________________ A 38% DROP IN AVERAGE BDL COINCIDENT INDICATOR IN 2020 BDL’s coincident indicator, a cyclical indicator for Lebanon’s economic activity and which aggregates a number of real sector indicators, has reported 173.9 in December 2020, or an average of 180.2 in the year 2020, contracting by 38.4% relative to the year 2019. Comparatively, the average coincident indicator had grown by 0.4% over the previous three years and by 1.5% over the previous five years. It was normal that the severe economic crisis that erupted since the last quarter of 2019, the State’s default on its foreign debt in the first quarter of 2020, the Covid-19 Pandemic crisis which left the country in a lockdown over several weeks starting the second quarter of 2020, the devastating Beirut Port explosion in the third quarter, and the domestic political crisis since the fourth quarter all are factors that weighed and continue to weigh on economic activity, generating real sector sluggishness, monetary and financial drifts and significant socio-economic pressures on households. Within this environment, the IMF had estimated Lebanon growth at a -25% real contraction in the year 2020. GDP has actually contracted from US$ 52 billion to US$ 19 billion, a nominal contraction of 64%, of which a 25% contraction in real GDP and a 39% decrease in prices of goods and services in US$. As a result, income per capita in Lebanon declined from US$ 7,660 in 2019 (ranking 85th in the World out of 192 countries) to US$ 2,745 in 2020 (ranking 135th), with 50 countries surpassing Lebanon in terms of socio-economic conditions in one year. For 2021, IMF forecasted Lebanon’s growth at –9%. According to the IMF, Lebanon is the only country in the region where activity is expected to contract further, reflecting the deep economic and financial crisis that has been worsened by the pandemic’s second wave. Likewise, the World Bank forecasted growth at -9.5% for 2021, on the back of a 20% contraction in 2020, as per World Bank estimates. The evolution of real sector indicators this year is actually a mirror image of a further contracting economy. Among the indicators that reported negative growth over the first four months of 2021, we mention the new car sales with a decline of 62.6%, the number of passengers at the Airport with a contraction of 35.2%, the value of cleared checks with a drop of 27.3% and the construction permits with a fall of 36.0% . The indicator with positive growth was Port activity, with the merchandise at the Port of Beirut reporting an expansion of 12.4% year-on-year and the value of property sales with a rise of 36.6% year-on-year. BDL COINCIDENT INDICATOR Monthly Monthly Y.o.Y varia- YTD variation Average YTD Average an- Indicator Variation tion Indicator nual variation Dec-19 265.9 -3.0% -11.6% -11.6% 292.6 -4.9% Jan-20 259 -2.6% -12.5% -2.6% 259.0 -12.5% Feb-20 258.3 -0.3% -13.3% -2.9% 258.7 -12.9% Mar-20 199.7 -22.7% -35.5% -24.9% 239.0 -20.6% Apr-20 172.5 -13.6% -45.4% -35.1% 222.4 -27.1% May-20 162.8 -5.6% -45.3% -38.8% 210.5 -30.6% Jun-20 152.8 -6.1% -47.9% -42.5% 200.9 -33.4% Jul-20 151.6 -0.8% -50.2% -43.0% 193.8 -35.8% Aug-20 144.3 -4.8% -50.5% -45.7% 187.6 -37.6% Sep-20 157.8 9.4% -44.5% -40.7% 184.3 -38.3% Oct-20 165.2 4.7% -41.2% -37.9% 182.4 -38.6% Nov-20 164.5 -0.4% -40.0% -38.1% 180.8 -38.7% Dec-20 173.8 5.7% -34.6% -34.6% 180.2 -38.4% Sources: BDL, Bank Audi's Group Research Department Week 23 May 31 - June 6, 2021 2 MAY 31 - JUNE 6, 2021 WEEK 23 ____________________________________________________________________________ MERCHANDISE AT PORT OF BEIRUT UP BY 13% IN FIRST FOUR MONTHS OF 2021 The latest statistics released by the Port of Beirut revealed a 6.2% decline in the Port’s revenues in the first four months of 2021 compared to the same quarter of the previous year. The Port’s revenues actually reached US$ 35.4 million in the first four months of 2021. In parallel, the number of containers registered an annual increase of 16.8% in the first four months of 2021 against same period in 2020 to attain 155,625 in the first four months of 2021. However, the number of ships revealed a fall of 18.4% year-on-year to reach 418 vessels in the first four months in 2021. The quantity of goods rose by a yearly 12.8% to 1,662 tons in the first four months of 2021, following a fall of 37.3% reported in the same period of 2020. Transshipments contracted by 70.8% year-on-year to attain 47,950 containers in the first four months of 2021, following a rise of 13.8% in the corresponding period of 2020. ACTIVITY OF THE PORT OF BEIRUT Number of ships and merchandise tonnage 2,882 2,859 3000 2,687 2,455 2500 2,350 2000 1,662 1,474 1500 LEBANON'S1000 REAL ESTATE MARKET 699 617 618 565 563 512 500 418 0 4M-15 4M-16 4M-17 4M-18 4M-19 4M-20 4M-21 Number of ships Merchandise tonnage (000s of tons) Number of containers and total revenues 300 272 282 265 254 250 226 200 156 150 133 100 77.6 79.1 72.2 74.3 65.3 37.8 50 35.4 0 4M-15 4M-16 4M-17 4M-18 4M-19 4M-20 4M-21 Total revenues (US$ million) Number of containers (000s) Sources: Port of Beirut, Bank Audi's Group Research Department _____________________________________________________________________________ VALUE OF CLEARED CHECKS DOWN BY 22% IN THE FIRST FIVE MONTHS OF 2021 Total value of cleared checks, an indicator of consumption and investment spending in the Lebanese economy, declined by 21.6% year-on-year in the first five months of 2021 referring to regression in spending during the above mentioned period.