Lebanon

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

Lebanon

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

  • Syrian President Bashar al-Assad's is unlikely to regain full control of the country, but has consolidated his control across a belt of territory stretching from the port cities of Tartous and Latakia in north-western Syria, through Homs in the centre of the country to the capital Damascus in the south-west. Jihadist group Islamic State (IS) has gained significant ground since 2014, and currently holds approximately a third of the country's territory.

  • Our core scenario sees the civil war continuing for many years, ending in a partition of Syria along sectarian lines - either as the outcome of a negotiated settlement between the warring parties, or through an extended stalemate and de facto break-up of the country. An outright victory by either the Assad regime (actively backed by Iran and Lebanese Shi'a militant group Hizbullah), or the...

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Lebanon Operational Risk Coverage (9)

Lebanon Operational Risk

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BMI View: Lebanon's appeal to investors is severely undermined by the country's exposure to a range of wider regional security risks, the most pertinent being the ongoing conflict in neighbouring Syria. On top of this, Lebanon is caught up in the Sunni-Shi'a divide, with the major powers of both denominations (Saudi Arabia and Iran, respectively) vying for influence within the country. Israel also remains belligerent towards Lebanon-based terrorist group Hizbullah. These substantial risks have pulled Lebanon's fractured society and government in competing directions, hindering policymaking, economic reform, and capacity to enforce the rule of law. In addition, the influx of refugees from Syria is placing unmitigated pressure on already struggling logistics networks and government services, and...

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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 thplace out of 18...

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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 electricity, water and fuel supplies will limit Lebanon's growth. Consequently,...

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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 provides 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...

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Lebanon Industry Coverage (7)

Autos

Lebanon Autos

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Over the past quarter, BMI has become significantly more negative on the new vehicle sales outlook for Jordan, Lebanon and Syria. This reflects the deteriorating regional economic and political situation. Of the three countries covered in this report, we believe that it is Lebanon which holds the strongest near-term growth potential, where we forecast 2% growth in new vehicle sales over 2015, despite the introduction of tougher rules on car loans introduced by the Banque du Liban.

Conversely, we are targeting a 4% fall in sales within Syria, to 4,800 units and a massive 15% slump in new car sales in Jordan, to 14,450 units. The main reason behind our more pessimistic near-term stance lies in the growing threat to Jordan's cross-border trade with Syria and Iraq caused by ongoing border attacks from Islamic State (IS) insurgents. According to an April 2015 report by the Associated Press, the violence has led to...

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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: It...

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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 Syria....

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Insurance

Lebanon Insurance

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BMI View: Growing demand for health insurance is the main driver of the expansion of Lebanon's insurance sector, both in 2015 and through the forecast period. Price competition will hold back the development of motor vehicle and property insurance and, indeed, the entire non-life segment. For life insurers, the challenge is that existing users have limited need for new products, while new users are difficult to reach.

Lebanon's insurance sector stands out for three reasons. Even by the standards of the Middle East, the sector is fragmented, consisting of around 50, mostly composite companies. For most companies, the business that they write can be measured in tens of millions of USD - or less. Second, the life segment is well established, accounting for nearly 30% of total premiums. Third, the non-life segment is dominated by health...

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Pharmaceuticals & Healthcare

Lebanon Pharmaceuticals & Healthcare

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BMI View: Lebanon's drug pricing legislation will keep medicine prices among the lowest in the Middle East region. In addition to this, the government's commitment to achieving universal access to healthcare will drive growth in the pharmaceutical market. Generic drug makers will see strong growth following the implementation of a unified prescription form, as part of the National Social Security Fund. However, political instability and pressures faced by the influx of Syrian refugees will continue to negatively impact the healthcare sector, adding downside risk to our pharmaceutical outlook.

Headline Expenditure Projections

  • Pharmaceuticals: LBP2,394.38bn (USD1.59bn) in 2014 to LBP2,594.09bn (USD1.71bn) in 2015; +8.3% in local currency and +7.9% 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, so the government has come up with plans to liberalise the market including launching a third mobile market operator, but BMI believes they will have little real effect. This is potentially why the mobile market has failed to grow over the last four years. BMI believes this situation is unlikely to change over our forecast and we therefore downgraded the outlook for mobile growth to 2019. On the upside, operators have benefited from increase in data service usage as...

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