Lebanon
In-depth country-focused analysis on Lebanon's economic, political and operational risk environment, complemented by detailed sector insight

Our comprehensive assessment of Lebanon's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Lebanon, as well as the latest industry developments that could impact Lebanon's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Lebanon before your competitors.

Country Risk

Lebanon Country Risk

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Core Views

  • The ongoing civil war in Syria is having severe repercussions on the Lebanese economy. Lebanon's medium-term growth trajectory will settle well below pre-crisis levels due to a lack of investment in transportation and energy infrastructure.

  • Despite renewed fears over the economy's gaping external asymmetries, a loyal depositor base in the domestic banking sector, combined with a massive arsenal of foreign exchange reserves, should help bolster underlying stability through what will turn out as a prolonged period of political volatility. This will minimize the potential for an unexpected devaluation of the pound in 2015.

Major Forecast Revisions

  • We forecast real GDP in Lebanon to expand by 2.6% in 2015, from our previous forecast of 2.4%. That said, elevated political...

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Lebanon Operational Risk Coverage (9)

Lebanon Operational Risk

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BMI View: Lebanon is one of the poorest regional performers with regards to labour market risks, with a small labour force, high employment costs, regionally low basic skills levels and expenditure on secondary education and a limited (albeit developing) tertiary education system. Its overall rating is boosted, however, by the most flexible workforce in the region due to limited regulations and strikes. Overall, we give Lebanon a total Labour Market Risk rating of 47.2 out of 100 in our Labour Market Risk Index. This puts it in 12 th...

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Lebanon Crime & Security

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Lebanon is a generally unsafe place for foreign business travellers, expatriate workers, and tourists. Risks to these groups range from petty, low-level crimes such as burglary and street crimes to sophisticated terrorist networks that threaten national security. The risk of terrorist attacks in Lebanon remains high, and terrorist networks, most notable among them Syria-backed Shia militant group Hizbullah, who are a significant presence in south of the country and the Bekaa Valley, offer refuge for many terrorists. There has, moreover, been a significant uptick in acts of terror since the civil war in neighbouring Syria began in 2011, with attacks concentrated on the border area with Syria, as well as in the urban centres of Beirut and Tripoli.

Criminal risks are rising in Lebanon, again in part due to a spillover of continuing violence in Syria. Foreign investors should note that violent crimes such as armed robberies and car jackings are...

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Lebanon Labour Market

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BMI View: Lebanon is one of the poorest regional performers with regards to labour market risks, with a small labour force, high employment costs, regionally low basic skills levels and expenditure on secondary education and a limited (albeit developing) tertiary education system. Its overall rating is boosted, however, by the most flexible workforce in the region due to limited regulations and strikes. Overall, we give Lebanon a total Labour Market Risk rating of 46.4 out of 100 in our Labour Market Risk Index. This puts it in 11 th...

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Lebanon Logistics

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BMI View: Given the recent turmoil in Syria, Lebanon is largely inaccessible overland, meaning greater strain is being placed on its shipping and air freight capabilities. While these industries are enjoying the increased demand for their usage, we believe that they are insufficient to supply Lebanon with the logistics capabilities required to conduct its international trade for the long-term, without considerable investment. This will limit the country's economic growth and leave it unable to supply its rapidly increasing indigenous and refugee populations. Similarly, the extra pressure placed upon the already-struggling electrical, water and fuel supplies will limit Lebanon's growth. Lebanon has been awarded a score of 51.4...

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Lebanon Trade & Investment

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BMI View: Despite offering one of the most welcoming policies for international trade and foreign investment in the MENA region, Lebanon remains a high risk location for FDI. On the positive side, the country offers a number of incentives in certain targeted sectors and a low corporate tax rate for all firms. However, the ongoing civil war in neighbouring Syria is having a negative impact on the functioning of Lebanon's political system, demand for key exports, and economic growth. In addition, a weak rule of law means that protection of physical and intellectual property is lacking, and judicial dispute resolution is beset with delays. Consequently, Lebanon receives a modest score in the overall BMI Trade and Investment Risk Index, at 56.3 out of 100, which ranks it in the middle of the pack regionally, in eighth place out...

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Lebanon Industry Coverage (7)

Autos

Lebanon Autos

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Heightened risk from the situation in Syria, coupled with a weak economic outlook, will continue to dampen autos demand in the Levant region over the course of 2015. Of the three countries covered in this report, we believe that it is Jordan that has the strongest near-term growth potential, where we are targeting 6.7% growth in new vehicle sales over 2015, to 18,855 units. However, Lebanon will remain the largest regional market overall, on 42,823 units, up by 4.1% during 2015.

Backing up our optimistic outlook on the evolution of new vehicle sales in Jordan is our Country Risk team's belief that economic activity will strengthen from 2015 onward, due to robust public investment and gradual improvements in domestic demand. BMI forecasts real GDP growth to stand at 2.9% in 2014 and 3.4% in 2015, compared to an annual average of just 2.6% between 2010 and 2013.

In particular, we expect construction activity and the...

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Commercial Banking

Lebanon Commercial Banking

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Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Food & Drink

Lebanon Food & Drink

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We forecast a modest acceleration in private consumption growth to 3.4% in 2015, compared with expected growth of 2.5% in 2014. There has been a gradual improvement in the domestic economy over the first half of 2014, and this is likely to support continued investment in the country's food processing and mass grocery retail sectors.

Headline Industry Data (local currency)

  • 2014 per capita food consumption = +1.3%; forecast compound annual growth rate (CAGR) 2013 to 2018 = +4.6%.

  • 2014 soft drinks value sales = +4.5%; forecast CAGR 2013 to 2018 = +4.8%.

  • 2014 mass grocery retail (MGR) sales = +6.5%; forecast (CAGR) 2013 to 2018 = +8.0%.

Key Company Trends

ACCBC Acquires NBC Majority Stake:...

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Information Technology

Lebanon Information Technology

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BMI View: Weaker than expected economical growth has lead BMI to downgrade its outlook for Lebanon's IT market, as a result we believe that it is expected to reach LBP575bn in 2014. Growth will rebound as of 2015, however, and the market will expand at an average rate of 7.24% over 2015-2018. While political instability and the lack of structural reform have lead to downgrading of economic growth short-term, BMI believes that there are a number of factors ultimately contributing to the IT sector's growth. These include rising incomes, declining device prices, improvements to telecoms infrastructure and modernisation by enterprises and the public sector. On the downside, IT development in Lebanon is subject to significant uncertainty as a result of security issues, which could be destabilising depending on the conflict in...

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Insurance

Lebanon Insurance

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BMI View: Insurers in Lebanon and Jordan face some key risks during our forecast period through to 2019, including downwards pressure on pricing caused by intense competition within a fragmented marketplace and demographic challenges. In Lebanon, economic uncertainty and currency fluctuations mean we expect to see overall contractions in life and non-life insurance by 2019. The outlook for Jordan is more positive, with healthier domestic economic growth supporting expansion of a range of life and non-life lines.

In 2015, both Lebanon and Jordan are expected to record overall increases in life and non-life insurance premiums written. The key driver of this growth is economic expansion. Healthy domestic economic growth in Jordan, boosted by falling global oil prices, will increase household consumption and demand for products that fill in the gaps...

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Pharmaceuticals & Healthcare

Lebanon Pharmaceuticals & Healthcare

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BMI View: Lebanon's healthcare system is under enormous strain as the number of Syrian refugees seeking treatment in the country has sharply risen. Continued political instability will negatively impact government policy regarding healthcare and will in turn put the pharmaceutical sector at risk. However, high per capita spending, an increasing burden of non-communicable diseases along with efforts by the Health Ministry to tackle high levels of corruption within the sector will help sustain market growth in the coming years.

Headline Expenditure Projections

  • Pharmaceuticals: LBP2,394.38bn (USD1.59bn) in 2014 to LBP2,594.09bn (USD1.60bn) in 2015; +8.3% in local currency and +0.7% in US dollar terms.

  • ...

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Telecommunications

Lebanon Telecommunications

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BMI View:  A lack of true competition in the mobile market has held back Lebanon's growth potential and we continue to forecast it remaining below 100% for the duration of our five-year forecast period. Government control stifles investment and innovation. We believe that pent-up demand, rather than significant network development and competitive pricing of telecoms services, is the main growth driver in Lebanon's telecoms market. There are few long-term plans for the future and the continued short extensions of mobile management contracts do little to incentivise planning. Previous strong growth will fall to minimal increases unless...

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