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
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, Russia, and Lebanese Shi'a militant group Hizbullah),...
Lebanon Operational Risk Coverage (9)
Lebanon Operational Risk
Lebanon Operational Risk
BMI View: Lebanon's appeal as an investment destination has been decimated by the multitude of security risks which are posed to business property and foreign workers, all of which require extensive and costly preventative measures. Most of these threats stem from the activities of the Shi'a militant group Hizbullah, which is both an integral element of the Lebanese state and a proscribed terrorist organisation. The group has launched terrorist attacks, engaged in money laundering, and facilitated the activities of organised criminal gangs. In addition, its decision to intervene in the Syrian civil war has stoked sectarian violence and increased the risk of an interstate conflict, which is already a severe threat given the tradition of hostilities between Hizbullah and Israel. The few positives for investors, such as a low rate of violent crime, are more than outweighed by the risk of property and staff...
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 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 Index...
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 fundamental view of the Lebanese insurance sector remains unchanged. It is a small, but steadily growing market. The expansion is being driven by demographics and rising health care costs: this is boosting health insurance (and personal accident insurance) premiums. The prospects for life insurance are hampered by the fact that all households that understand it and who can afford it are already using it. Price competition will hamper the development of the motor vehicle and property insurance sub-sectors.
Lebanon Medical Devices
BMI View: Although recording a moderate CAGR over the forecast period, the market will 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, market growth will be constrained by political instability, widespread corruption, economic stagnation and high market competition.
Pharmaceuticals & Healthcare
Lebanon Pharmaceuticals & Healthcare
BMI View: We hold a bullish outlook for Lebanon's pharmaceutical market, the government's commitment to improving healthcare access coupled with a rising non-communicable disease burden will be a key driving factor for growth over the long-term. However, economic stagnation and political uncertainty made worse by the ongoing civil war in Syria will add downward pressure on our forecast.
Headline Expenditure Projections
Pharmaceuticals: LBP2.31trn (USD1.53bn) in 2014 to LBP2.47trn (USD1.63bn) in 2015; +6.8% in local currency and +6.4% in US dollar terms. Forecast revised downwards from last quarter based on newly confirmed...
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...