The economic report of Bank Audi was issued for the first quarter of the year 2023, titled “Macro-economic blurring in light of the political, legislative and reform stalemate.” It stated the following:
“The first few months of the year 2023 were characterized by a continuous presidential vacancy, the convening of the caretaker government’s sessions being limited to discussing emergency matters, a semi-stagnation in legislative work, and stagnation in the urgent reforms required to reach a final agreement with the International Monetary Fund. This political-economic reality was translated into macro-economic ambiguity, massive monetary pressures, and repercussions on the exchange rate. Household spending remained weak, although it improved somewhat, as evidenced by the rise in imports. The ratio of investment to GDP has reached a low level, in light of the reluctance of investors to make investment decisions in this cloudy atmosphere at the political and economic levels.
An analysis of the economic performance during the first months of this year shows that the real sector indicators reflected the mixed performance of the economy in general. Among the indicators that recorded positive growth are the number of tourists (+29.0%), the number of passengers traveling through Beirut Airport (+24.0%), and the number of arriving and departing flights (+19.9%). As for the indicators that recorded a contraction during the first quarter of the year 2023, we mention the cleared checks, which recorded a contraction of 22.4%, and the volume of goods in the port (-2.7%).
In terms of the external sector, a surplus in the balance of payments amounted to $1,175 million during the first quarter of 2023, which followed a deficit of $3,197 million in 2022. This surplus is attributed to the growth in banks’ net foreign assets of $2,005 million in the first quarter of 2005. This year, which was accompanied by a decrease in the net foreign assets of the Banque du Liban, amounting to $830 million.
-In terms of the monetary situation, the decline in the BDL’s foreign exchange reserves amounting to $775 million during the first quarter of the year is attributed to the Central Bank’s intervention through the “Sarfa” platform in the context of BDL Circular No. 161 issued at the end of the year 2022. The BDL is currently witnessing the net asset value of Negative according to his semi-monthly budget. While the central bank’s capital account amounted to $700 million, the BDL entered the assets section, adjusting valuation differences at $35 billion, and other assets at a value of $11 billion, which led to a negative net asset value of -45 billion dollars, without calculating losses. The potential for public sector credits and the Eurobonds portfolio, resulting in total losses for the Banque du Liban of about $63 billion.
-In addition, the first months of 2023 were marked by a remarkable rise in inflation. The consumer price index jumped by 366.3% annually in March 2023, according to the Research and Consulting Corporation. For the first time, the dollar exchange rate broke the barrier of 100,000 LL. Amidst the blurring of the political and economic scene, speculation operations, and the continuing imbalance between the volume of domestic currency and the volume of foreign currency in the parallel market.
As for the banking sector, customer deposits decreased from $168.4 billion at the end of October 2019 to $97.6 billion at the end of March 2023, or by 42%. The dollarization of deposits increased from 73.4% in October 2019 to 96.4% in March 2023. Lebanese banks have continued to reduce their borrowing leverage since the outbreak of the crisis. The credit portfolio to the private sector declined from $54.2 billion to $10.0 billion, or 81.5%. Banking totals also showed a contraction in the private funds of banks from $20.6 billion at the end of October 2019 to $4.9 billion at the end of March 2023, as a result of net banking losses during the covered period. These losses stem from the exorbitant cutting costs, the high operational burdens due to the noticeable inflation, in addition to the requirements for monitoring provisions that Lebanese banks face in order to confront sovereign risks and the risks of the private sector in general.
With regard to the Lebanese capital markets, the stock market continued its upward trend after two consecutive years of significant price hikes. The price index jumped by 33.3% in the first quarter of 2023, after a growth of 37.2% in 2022, driven by increases in Solidere share prices. The rise in prices this year comes in light of an annual increase in trading volumes by 138.8%, from $51 million in the first quarter of 2022 to $122 million in the first quarter of 2023. Accordingly, the stock turnover rate (calculated on the basis of the annual turnover) increased. to market capitalization) from 2.0% to 2.5% during the covered period.
