Ominous sentiments

Lebanese confidence in the economy reached a new low in 2013

A US stealth bomber
Confidence killer (Philip Leara | Flickr | CC 2.0)

Lebanon’s consumers ended 2013 wearier than ever and harbored little to no optimism about the country’s economic prospects in light of the miserable security situation and political bickering that dominated the year.

A report on Lebanon’s Consumer Confidence Index (CCI), produced jointly by the American University of Beirut and Byblos Bank offered a reminder of just how miserable the country was in the second half of 2013. According to a research document detailing index results and analysis published by the Byblos Bank research department on May 8, the CCI averaged 29 points per month in 2013, down 10.7 percent from 2012. Within the year, the index fell precipitously from a year-high of 35.3 in August to 22 points in September, marking the index’s lowest monthly reading since its inception in 2007.

Byblos Bank noted that the Q4 2013 confidence readings were more than 70 percent lower than those in each of 2008 and 2009, marking a steeply downward trend. And as a whole, the numbers from the second half of 2013 — which at 28.6 were the index’s most dismal ever when calculated on a semi-annual basis — were “alarming” in the analysts’ eyes when compared with the first half of the year because the H1 figures had already reached a record low. According to the bank, this nullified earlier assumptions that the weak readings of 2012 would constitute a bottoming out.

The unanticipated further drop in confidence in 2013 was “hardly surprising” in hindsight, according to the report, because of the “prevailing sense of instability, uncertainty and caution among Lebanese consumers.”   The year’s steepest fall in consumer confidence was linked to the threat of US air strikes against Syria in late August and early September 2013.

Look out below

The forward-looking part of the consumer surveys, measured in the ‘expectations’ sub-index of the CCI, dropped from an average 29.8 to 26 points from the third to the fourth quarters of 2013 — the lowest level since the start of the CCI’s calculations in 2007. Q4 2013 also showed consumers as less optimistic in their expectations than in their perception of the present situation. According to Bank Byblos’ analysis this pessimistic outlook is in contradiction to the general trend among Lebanese consumers to be optimistic for the near-term future.

After listing various political and security factors that influenced consumer confidence in 2013, the Byblos Bank analysis concluded that the CCI drop in the second half of last year “does not bode well for a substantial resurgence of economic activity in the near term.”

Nassib Ghobril, Byblos Bank Group’s chief economist said in a press statement earlier in the week that in his opinion, “a positive political shock of the magnitude of the Doha Accord” would be needed to remedy the current lack of consumer confidence and restore it to higher levels.

The CCI, which is composed of two sub-indices measuring perception of the present situation and expectations for the near future, is compiled based on 1,200 monthly face-to-face interviews conducted by pollster Statistics Lebanon. Results are stratified by region, age, income and religion.

According to the researchers, the CCI evolution since 2007 describes four phases defined by swings between uncertainties and relative stability. The highest CCI readings occurred in a period of relative stability between May 2008 and June 2010. The period from January 2012 to December 2013 is characterized as a phase of “deepening uncertainties.”

Thomas Schellen

Thomas Schellen is Executive's editor-at-large. He has been reporting on Middle Eastern business and economy for over 20 years.