Economic indicators are showing signs of a prolonged slowdown (0.2% Growth in 2018), along with a relatively high inflation rate. This stagflation is accompanied by capital flight as the macro and fiscal backdrops worsen, raising doubts of the Treasury’s ability to meet its obligations. On the other hand, while the balance of payments deficit accelerates, the need for BDL to fill this gap is rising proportionally. Meanwhile BDL has maintained its most recent basket of unconventional monetary policies aimed at topping up its hard currency reserves, offering in exchange sizable profits for the local commercial banking sector.
Furthermore, BDL has been covering the Treasury’s commitments from its own pocket. The central bank has paid USD 2.152Bn in directly to cover maturing principal and coupons for Lebanese Eurobonds. Meanwhile signs from leading economic indicators all show that the adverse economic situation will continue.
The full brief is available below for download as pdf.