Repeated delays in government formation depressing consumer confidence

The postponement in the formation of the government has transformed the longstanding skepticism of households into disillusionment about the seriousness of the political class to improve the quality of living of citizens.
by TK Maloy

1 November 2018 | 07:15

Source: by Annahar

  • by TK Maloy
  • Source: Annahar
  • Last update: 1 November 2018 | 07:15

The Byblos Bank Group's downtown headquaters in Beirut. (Byblos Bank.)

BEIRUT: The Byblos Bank’s Consumer Confidence report released Tuesday shows that the Index decreased by 5.7 percent in July from the preceding month, and the overall third quarter of 2018 showed no confidence gains from the second quarter of the year.

Nassib Ghobril, Byblos Bank Chief Economist said, ''the lack of progress and procrastination in the development of a new  government in Lebanon were the main factor that affected household sentiment in the third quarter of 2018.''

He noted that ''the ongoing delays in the formation of a cabinet following the May 2018 parliamentary elections, led to the stagnation of consumer sentiment in Lebanon during the third quarter of the year and sapped any momentum in confidence that the elections generated."

The Byblos Bank/AUB Consumer Confidence Index is a measure of the sentiment and expectations of Lebanese consumers toward the economy and their own financial situation and is comprised of two sub-indexes -  the Present Situation Index and the Future Expectations Index. 

The Byblos Bank/AUB Present Situation Index averaged 66 in the third quarter of 2018 and decreased by 2.3 percent from the preceding quarter, while the Byblos Bank/AUB Expectations Index averaged 81.4 and grew by 3.6 percent from the second quarter of 2018. Further, the average monthly score of the Index in the third quarter of 2018 was 29 percent lower than the quarterly peak score of 105.8 registered in the fourth quarter of 2008, and remained 22.1 percent below the annual peak of 96.7 reached in the full year 2009.

Ghobril added, ''Lebanese citizens had high expectations following the parliamentary elections that the various political parties would quickly form a government and implement concrete measures to improve their quality of living and economic well-being, as they were led to believe that changing the electoral law would improve the performance of politicians and would result in better accountability. Instead, citizens discovered that the political behavior of most parties hardly changed after the elections.”

The latest attempt at cabinet formation this week looked like a matter of 24 hours of final negotiations, but quickly fell apart again.

These delays have led to lost opportunities for the Lebanese economy and triggered rumors about the stability of the Lebanese pound and the state of public finances.

Meanwhile, households continued to also feel the impact of last year's tax increases through inflationary pressures, economic stagnation, decrease in their purchasing power, and higher cost of living, along with a lack of tangible improvement in their quality of living.

''The hold-up in putting together a cabinet the formation of the government has transformed the longstanding skepticism of households into disillusionment about the seriousness of the political class to improve the quality of living of citizens. As a result, the Byblos Bank/AUB Expectations Index retreated by 11 percent since last May," Ghobril said.

The Byblos Bank economist pointed out that 'the third-quarter results of the Index continue to show that Lebanese citizens need to see concrete evidence and tangible solutions that improve their economic well-being in order to sustain their confidence level, as they have repeatedly seen many politicians put personal or partisan agendas ahead of the national interest'

"The ongoing delay in the formation of a new government will continue to dent confidence and the future expectations of households," Ghobril said.


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