2023-09-02 21:04:48
During the past year, the value of commodities imported by Lebanon jumped by 39%, to exceed the limits of $19.05 billion at the end of the year, which made it touch pre-crisis levels in 2019. It was clear that a large part of this increase was due to the rise in the prices of imported oil derivatives, in addition to To the inflationary pressures resulting from the rise in oil prices, which affected the prices of all imported commodities. However, some insisted on considering this development as an economic recovery indicating high levels of consumption, despite the fact that the country has not entered any serious path of financial and monetary correction.
At the time, this talk was not innocent. What is required of marketing this recovery was nothing but to underestimate the reforms required of Lebanon, which by their nature affect the interests of the political and financial elites in the country. From this angle, it is possible to understand the insistence of the former central bank governor, Riad Salameh, and the elites close to him, to rely on these numbers, to talk about “economic growth” that the country achieved in 2022, which reflects the numbers of major international institutions such as the Monetary Fund and the World Bank. Today, the numbers of 2023 came to confirm what is certain: the bulk of the increase in imports in 2022 was not a sign of recovery, but was an urgent increase as a result of the rise in oil prices, indicative of the decrease in import numbers this year with the decrease in the average cost of importing fuel.
The numbers of 2023 lie about the recovery of 2022
When Lebanon witnessed this compelling increase in import figures in 2022, this development was associated with an increase in the average price of a barrel of oil (Brent crude) from $70.86 per barrel in 2021 to $100.93 per barrel in 2022, which reflected an increase of 42% between the two periods. . As it is known, this large increase came as a result of a group of factors, such as the repercussions of the Ukrainian war, and the recovery of oil demand, in parallel with the exit from the crisis of the Corona epidemic.
On this basis, it is possible to understand the increase in the cost of imports in that year by a similar percentage, i.e. 39%. The rise in oil prices not only raises the cost of importing petroleum derivatives, which represented a quarter of the import bill last year, but also raises the prices of all products whose production and shipping costs include oil. Noting that the International Monetary Fund expects the global inflation rate to reach 8.7% over the past year, as a result of several factors, including the rise in oil prices.
During the year 2023, the verse reversed, after the average price of a barrel of oil declined to about $79.75 to date, a decrease of more than 20%, compared to the average of last year. It is known that this decline mainly comes as a result of the oil markets adapting to the shifts that occurred in the supply chains of energy sources, after the outbreak of the war in Ukraine, in addition to the decisions to reduce production taken by the OPEC + alliance.
In all cases, and in parallel with the decline in the average price of a barrel of oil in this way, the volume of imported goods declined in the first seven months of the year 2023 to $9.8 billion, a significant decrease of 9.3%, compared to the same period last year. Knowing that the current year witnessed a remarkable increase in the number of arrivals to Lebanon, which did not necessitate an increase in demand for consumption, not the other way around. In this way, it was clear that the main factor that controlled the increase in the value of imports in 2022, and then its decrease in 2023, was the global oil prices and global inflation rates that affected the prices of all commodities.
Going into the details of the import invoice confirms this theory. The cost of importing oil and its derivatives decreased during the first seven months of this year by $541 million, compared to the same period last year, a decrease of 17.3%. In this way, the figures confirmed that the decrease in the import bill for oil and its derivatives in particular played a major role in driving the decline in the total import volume during the current year. It should be noted that these developments reduced the proportion of petroleum commodities, out of the total import bill, to 26% during this year, compared to 29% during the previous year.
Export volume erosion
The search for the signs of the alleged “economic recovery” leads us to ask about the status of the productive sectors, specifically in terms of their ability to export and reduce the deficit in the trade balance, i.e. the difference between exports and imports. Trade balance figures for the first seven months of 2023 show that the volume of Lebanese exports during this period did not exceed $1.6 billion, a significant decrease of 24.2% compared to the same period of the previous year.
Talking about the decline in Lebanese exports automatically prompts us to search for the challenges facing the basic productive sectors in light of the current crisis, foremost of which is the high cost of production after adjusting the electricity tariff and increasing the fixed fees on factories and institutions, in exchange for the long rationing hours and the constant need to operate costly private generators. . This is exactly what prompted some companies to dispense with EDL subscriptions entirely, and to rely exclusively on subscriptions or private electrical generators. At the same time, the complete removal of fuel subsidies contributed to the removal of the last factors that helped the productive sectors to control operating costs, in light of the deterioration of the exchange rate of the Lebanese pound.
In all cases, and as a result of all these developments, the trade balance recorded a deficit of $8.2 billion until the end of July, which contributed to pressure on the balance of payments and the need for hard currency to finance imports. In this sense, the increase in the cost of imports cannot be seen as a healthy sign that expresses an improvement in the ability to consume. Rather, it should be approached as a negative indicator, in terms of the need for additional inflows of hard currency, to finance the continuing deficit in the trade balance, and to secure dollars to cover the import bill.
Faced with this reality, all these conclusions are consistent with the conclusion of the World Bank, which indicated in its latest reports that normalization with the crisis is not a path to stability, as some are trying to suggest in Lebanon. On the contrary, the World Bank was keen to put this conclusion as the title of its report, to stress its rejection of this approach, which is optimistic about some indicators – such as an increase in the volume of imports in 2022 – to claim the possibility of getting out of the crisis and recovery, without taking the path of reforms required by the government and Parliament. And the central bank. It is remarkable at that time that the World Bank noticed the issue of the increasing current account deficit, as a result of the increase in the volume of imports, but as a sign of a monetary crisis, not a sign of recovery, as some believe.
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