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.
Lebanon Country Risk
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 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 2016.
A protracted leadership vacuum, elevated sectarian tensions fuelled by entanglement in the Syrian civil war, and the risk of conflict with Israel will all continue to present challenges to Lebanon'...
Lebanon Operational Risk Coverage (9)
Lebanon Operational Risk
Lebanon Operational Risk
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 increased instability in a country highly polarised along politico-sectarian fault lines and already overwhelmed by nearly 1.2mn Syrian refugees. This has led to corrupt state institutions, widening social and geographical disparities and judicial...
Lebanon Crime & Security
Lebanon Crime & Security
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...
Lebanon Labour Market
Lebanon Labour Market
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...
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,...
Lebanon Trade & Investment
Lebanon Trade & Investment
BMI View: Despite offering one of the most welcoming policies for international trade and foreign investment in the Middle East and North Africa (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 Industry Coverage (8)
BMI retains a negative near-term view on the new vehicle sales outlook for Jordan, Lebanon and Syria. This reflects the deteriorating regional economic and political situation. We are now targeting falls in auto sales for all three countries over 2015.
Starting with Jordan, BMI retains a downbeat stance towards new vehicle sales this quarter, as we feel that the growing threat to the Kingdom's borders from ongoing attacks from Islamic State (IS) insurgents more than outweighs what is a reasonably propitious domestic macroeconomic backdrop.
According to an April 2015 report by the Associated Press (AP), ongoing border violence has led to the closure of the sole Syria-Jordan trade crossing, effectively paralysing its overland trade routes. The report also stated that Jordanian exports were already down by 17% y-o-y over the first two months of 2015, before the...
Lebanon Commercial Banking
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Food & Drink
Lebanon Food & Drink
We forecast a modest acceleration in private consumption growth to 3.8% in 2016, compared with expected growth of 3.5% in 2015. However, Lebanon remains stuck in a state of economic stagnation, with little prospect for an acceleration in growth over the coming quarters. This runs the risk of having a negative impact on continued investment in the country's food processing and mass grocery retail sectors.
Headline Industry Data (local currency)
2015 per capita food consumption = +3.4%; forecast compound annual growth rate (CAGR) 2014 to 2019 = +5.6%.
2015 soft drinks value sales = +4.8%; forecast CAGR 2014 to 2019 = +4.9%.
2015 mass grocery retail (MGR) sales = +7.4%; forecast (CAGR) 2014 to 2019 = +8.5%.
Key Company Trends
Lebanon Information Technology
BMI View: The Lebanese IT market, like the wider economy, underperformed its potential 2013-2015 as a result of domestic political inertia and regional security risks - and we expect this will continue to be the case in 2016. We do however have a more bullish outlook for the IT market from 2017, and forecast a local currency spending growth CAGR of 9.7% for 2016-2019, with total spending of LBP819.5bn expected in 2019. Our core scenario envisages income growth, improvements to telecommunications infrastructure, improving business sentiment and modernisation initiatives by both the public and private sector contributing to stronger demand for IT products and solutions. The outlook for Lebanon is however subject to considerable uncertainty and downside risk due to the domestic political situation and conflict in Syria. There has already been significant...
BMI View: Our general view of Lebanon's insurance sector is the same as it was in Q216. The sector is small and fragmented, with many sub-scale players. However, premiums are growing rapidly. This is mainly due to the ageing of the population and inflation in healthcare costs. Medical insurance is by far the most important sub-sector, and accounts for about half of total premiums written in the non-life segment. Price competition will, we think, hamper the development of the motor vehicle and property insurance sub-sectors. The prospects for the protection and savings offerings of the life insurers are restrained by the fact that all households who understand and can afford life insurance are already using it.
Lebanon Medical Devices
BMI View: The market will record moderate growth over the forecast period, and remain attractive to launch medical devices in the Levant region. Market drivers will include the demographic boost provided by the influx of Syrian refugees, the increasing incidence of chronic diseases, medical tourism, the predominance of private healthcare providers, import reliance and stronger market regulation. However, political instability, widespread corruption, economic stagnation and high market competition will constrain market growth.
Pharmaceuticals & Healthcare
Lebanon Pharmaceuticals & Healthcare
BMI View: We hold a cautiously optimistic outlook for Lebanon's pharmaceutical market over the coming years. The government's focus on improving healthcare access across the country coupled with a rising disease burden and relatively high per capita spending will drive the demand of high-value prescription medicines. However, the unprecedented influx of refugees escaping war-torn Syria, emergence of Islamic State violence and political stagnation pose significant downside risks to our forecast.
Headline Expenditure Projections
Pharmaceuticals: LBP2.46trn (USD1.63bn) in 2015 to LBP2.63trn (USD1.75bn) in 2016; +6.9% in local currency and +7.1% in US dollar terms. ...
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...