After a tumultuous year dominated by more than two months of intense war between Hezbollah and Israel, which ended with a cease-fire on Nov. 27, Lebanon’s private sector morale showed tentative improvement in December. According to the latest Purchasing Managers’ Index (PMI) published by Blominvest, the index edged up to 48.8 points — a modest gain of 0.7 points from November and its highest level in eight months.

In October, the Purchasing Managers’ Index (PMI) fell to its lowest level in more than three and a half years. By early December, several private-sector players expressed cautious optimism about the opportunities presented by a fragile cease-fire. Meanwhile, some airlines that had suspended flights to Beirut in September announced plans to resume services, taking advantage of the strong demand from the diaspora eager to visit family during the holiday season.

However, the PMI remains below the 50-point threshold, a level it has reached or exceeded only a handful of times in more than a decade, underscoring the fragile state of the Lebanese economy.

The index is derived from surveys of purchasing managers at 400 local companies. A reading below 50 indicates a contraction in economic activity and a pessimistic outlook, while a score above 50 signals improvement. However, a month-on-month increase in the index, even if it remains below 50, suggests a less pronounced slowdown, which can be interpreted as a relative improvement in conditions.

Subtle optimism

According to Blominvest analyst Helmi Mrad, the PMI was supported by improved performances in sub-indices measuring production, which increased from 46 points in November to 47.7 in December; new orders, which rose from 46.4 to 47.9; and new export orders, which jumped by more than four points, from 44.2 to 48.6.

"Interestingly, the companies surveyed were optimistic about the 12-month outlook, with the sub-index assessing expectations for production over this period reaching a record high of 61.8 points," Mrad said. "This optimism is due to the cease-fire agreement between Hezbollah and Israel, but hopes for a new president following the presidential election should not be overlooked," he added.

Events in Syria, where a rebel coalition toppled Bashar al-Assad's regime in December, do not yet appear to have been factored into the calculations of the companies surveyed, according to the published results.

The Lebanese Parliament is scheduled to convene on Jan. 9 to elect a president and end more than two and a half years of vacuum caused by internal political disputes amid a backdrop of regional tensions, predating the Gaza war that began on Oct. 7, 2023.

"Hopefully, these elections will be followed by the formation of a new government that will implement the reforms needed to attract more domestic and foreign investment. It is also encouraging to note that the latest World Bank report revealed that economic activity losses [$4.2 billion] due to the war were lower than previously forecast," Helmi Mrad noted.

According to the World Bank's latest report on the Lebanese economy, the cumulative decline in real GDP since 2019 — the year Lebanon plunged into a severe multidimensional economic crisis — is projected to exceed 38% by the end of 2024. The 5.4% GDP contraction recorded in 2024 represents a loss of $4.2 billion in consumption and net exports, excluding the cost of destruction caused by the Israeli army’s deadly bombardments since Oct. 8, 2023, which escalated to reach the capital on Sept. 23, 2024.