Lebanon Economic Outlook
After seemingly shrinking for the fifth straight year in 2022, economic conditions remain challenging in 2023. The currency has lost over half its value in the parallel market so far this year, which together with a series of official currency devaluations has fanned hyperinflation, hitting purchasing power. In addition, public spending likely remains weak due to revenue shortfalls, while the banking sector continues to be weighed on by low liquidity. That said, the downturn could be bottoming out, with the private-sector PMI up since the start of the year. Moreover, double-digit growth in visitor arrivals through March will be providing support. On the political front, the country remains without a president or fully-functioning government, which is paralyzing reform progress and thus blocking foreign financial assistance.
Inflation hit a fresh all-time high of 269% in April, up from 264% in March. Inflation will be by far the highest in the region this year, due to currency devaluations and the weak black-market lira. Further devaluations and downward pressure on the parallel-market FX rate are upside risks, while an improvement in the political situation is a downside risk.