Weak confidence, political instability, and currency volatility continue to drive soaring inflation

Inflation, currency volatility, and political rows wreak havoc on private confidence and consumption

Businesses operating in Lebanon must plan for high operational and receivables risks. Ensure you maintain your mitigation plans against exposure to toxic financial risks. B2Cs ought to maintain focus on the small but resilient high-income consumer segment that faces little to no price sensitivity. Maintain reasonable supply to capitalize on high consumption episodes during festive periods, largely driven by diaspora tourism. As for public demand–oriented businesses, engage with international organizations leading healthcare and reconstruction projects in Lebanon for the least risky business opportunities. 


Governmental paralysis continues in Lebanon with a presidential vacuum since October 30, 2022, when Michel Aoun’s term ended. Additionally, the caretaker government has been limited in its authority since parliamentary elections in May 2022. Weak private confidence continues to drive high demand for dollars and cause lira volatility on the black market rate, currently averaging LL 41,500 to the US dollar. Headline inflation softened from 240% YOY in January to 158% in October 2022; however, prices continue to grow around 15% on a monthly basis, driven mostly by fuel and food prices.

Our View

Lebanon’s economy will grow a meager 2% in 2023, having experienced an over 50% contraction since late 2018. The tumultuous environment will extend into 2023, with inflation remaining high and the lira volatile. Fragile and weak private confidence will keep consumption minimal, with consumer spending only slightly improving. Public consumption remains flat in 2023 as fiscal pressures limit expansive spending. Businesses will remain highly pressured on their margins, with output remaining slow due to weak consumption. At the crux of the tumultuous environment is the political instability that extends into 2023. FrontierView expects a long delay in electing a president followed by further quarreling over government formation. Expect delays in reforms, further pushing away an IMF bailout.

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