CREDIT LIBANAIS S.A.L.

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1 CREDIT LIBANAIS S.A.L. Issue No. 551 May 20 th May 26 th 2017 Economic Research Unit Credit Libanais Headquarters Adlieh Beirut, Lebanon Tel Fax

2 TABLE OF CONTENTS LEBANON NEWS ECONOMIC INSIGHTS > PRIVATIZATION AND ECONOMIC DIVERSIFICATION ARE THE MOST IMPORTANT MEASURES REQUIRED TO PROMOTE LONG-TERM ECONOMIC GROWTH IN THE ARAB WORLD 1 > UNDP SUPPORTS LEBANON S RENEWABLE ENERGY PROJECTS 2 > OCCUPANCY RATE IN LEBANON S HOSPITALITY SECTOR AT 69% IN APRIL > VALUE OF REAL ESTATE SALE TRANSACTIONS UP BY 8.94% Y-O-Y BY APRIL > LEBANESE TREASURY BILLS DOMESTIC PORTFOLIO VALUE UP BY 1.1% IN Q > INDUSTRIAL EXPORTS DROP BY 12% Y-O-Y BY FEBRUARY > ECONOMIC ACTIVITY SLIGHTLY IMPROVES IN Q > LEBANESE BANKS SUBSIDIZED LOANS PORTFOLIO AT $ MILLION BY END OF Q > FINANCIAL SECTOR S UTILIZED CREDITS REACH $63.54 BILLION AS AT Q > LEBANON S BALANCE OF TRADE DEFICIT WIDENS TO $4.22 BILLION IN Q > LEBANON S ANNUAL INFLATION AT 4.44% IN APRIL > NUMBER OF TOURISTS INCREASES BY 17.45% Y-O-Y BY APRIL CORPORATE NEWS > BANK AUDI EGYPT S NET PROFITS AT $11.59 MILLION IN Q > SOLIDERE TO DELIST ITS GDRS FROM THE LONDON STOCK EXCHANGE 13 PRIVATIZATION AND ECONOMIC DIVERSIFICATION ARE THE MOST IMPORTANT MEASURES REQUIRED TO PROMOTE LONG-TERM ECONOMIC GROWTH IN THE ARAB WORLD According to the World Economic Forum, Arab countries are required to reduce their dependence on natural resources and diversify their economies, increase the role of the private sector and minimize government interventions in their markets, create opportunities for their youth and support their workforces, and improve the innovation ecosystem. UNDP SUPPORTS LEBANON S RENEWABLE ENERGY PROJECTS The UNDP has been cooperating with the Lebanese Ministry of Environment, the CEDRO Project, and other concerned parties to lower the cost of producing electricity through solar and wind energy to compete with fossil fuel-based energy. MONETARY PERFORMANCE > MONETARY AGGREGATES 14 > MONEY MARKETS 14 LEBANESE EQUITIES > LEBANESE EQUITIES & CREDIT LIBANAIS INDICES 15 OCCUPANCY RATE IN LEBANON S HOSPITALITY SECTOR AT 69% IN APRIL 2017 The average occupancy rate in Beirut s hospitality sector stood at 68.8% during the month of April 2017, conveying a stellar 13.2 percentage-point annual increase, according to Ernst & Young. LEBANON'S ECONOMIC & FINANCIAL SECTOR INDICATORS 17 LEBANON'S RATINGS 18 VALUE OF REAL ESTATE SALE TRANSACTIONS UP BY 8.94% Y-O-Y BY APRIL 2017 The value of real estate transactions rose by 8.94% y-o-y to $3.07 billion by the end of the first four months of this year, from $2.81 billion during that same period last year. NUMBER OF TOURISTS INCREASES BY 17.45% Y-O-Y BY APRIL 2017 The number of tourists arriving to Lebanon rose by 17.45% y-o-y to 503,805 up to April 2017, from 428,947 tourists a year earlier. ECONOMIC RESEARCH UNIT - ADLIEH, BEIRUT LEBANON - TEL: FAX:

3 SYNOPSIS OF TERMS "BDL" "ABL" "MOF" "BOP" "IMF" "Moody's" "BSE" "GDRs" "M1" "M2" "M3" "M4" "CPI" "PPI" "CLASI" "CLFI" "CLCI" EIU EOY "P/E" "P/BV" "YTD" "YTD Price Performance" "Forex" "LBP" "USD" "Yen" "GBP" "CHF" "Y-O-Y" "GDP" "MENA" LE SAR AED BD Banque Du Liban Association of Banks in Lebanon The Lebanese Ministry of Finance Balance of Payment The International Monetary Fund Moody's Investors Service Beirut Stock Exchange Global Depositary Receipts Currency in Circulation + Demand Deposits in LBP M1 + Other Deposits in LBP M2 + Deposits in Foreign Currencies M3+ Treasury Bills Held By Non Banking System, Including Accrued Interests Consumer Price Index Producer Price Index Credit Libanais Aggregate Stock Index Credit Libanais Financial Sector Stock Index Credit Libanais Construction Sector Stock Index Economist Intelligence Unit End of Year Price to Earnings Multiple Price to Book Multiple Year To Date Yield to Date Price Appreciation Foreign Exchange The Lebanese Pound The United States Dollar The Japanese Yen The British Pound/ Sterling Pound The Swiss Franc Year-On-Year Gross Domestic Product Middle East and North Africa Livre Egyptienne Egyptian Pound Saudi Arabian Riyal United Arab Emirates Dirham Bahraini Dinar ECONOMIC RESEARCH UNIT - ADLIEH, BEIRUT LEBANON - TEL: FAX:

4 PRIVATIZATION AND ECONOMIC DIVERSIFICATION ARE THE MOST IMPORTANT MEASURES REQUIRED TO PROMOTE LONG-TERM ECONOMIC GROWTH IN THE ARAB WORLD The World Economic Forum published in the past week a report titled The New Economic Context for the Arab World in which it shed light on the major challenges and opportunities facing Arab countries amid the underlying global trends and potential risks. The report stated that trends that are most likely to shape the world in the next decade are focused in the areas of environment, economy/society, and technology. As far as the Arab region is concerned, the potential impact of global trends on Arab countries and the level of concern of the private sector about risks associated with them was measured on four different levels. First, rising income and wealth disparity was classified as the trend with the highest potential impact on the region, most strongly appearing in Tunisia, Oman, and Morocco. Second, and with respect to the increasing polarization of societies, this trend was most evidently spotted in countries like Yemen, where state collapse stands as a concrete risk, and Lebanon, where one-third of the executives expressed their serious worry in this vein. Third, on the rise of cyber dependency front, the UAE was classified as the country with the highest exposure to cyberattack and fraud threats. Lastly, and when it comes to the area of changing climate, countries like Qatar and Jordan, which are characterized by fragile environmental and geographic conditions, suffered most from the inability to adapt to climate change and its drawbacks. Beyond these four trends, the report mentioned that the region faces various other risks mostly related to its economic structure, particularly, its excess reliance on the production of raw materials and the lack of economic diversification. Moreover, the report covered the performance of a selection of Arab countries across different measures of economic development and selected pillars of competitiveness. GCC countries clearly outperformed their counterparts in every available dimension of economic development. In specific, the UAE and Qatar had the best performance as the two nations also led the region on the level of competitiveness. North African countries demonstrated a relatively homogeneous level of competitiveness while widespread youth unemployment remained the main challenge facing their economies. Finally, the Levant region namely, Jordan and Lebanon, enjoyed a better trade integration with the rest of the world as well as hosted the strongest and most advanced education and health sectors. However, the macroeconomic environment in both countries remained highly unstable and risky with Lebanon for instance, registering high levels of debt, budgetary deficits, and price deflation. More specifically, and also with respect to Lebanon, the country performed poorly relative to its counterparts across the different measures of economic development. For instance, Lebanon ranked 11 th among 13 covered Arab countries in terms of global competitiveness scoring 3.84, preceded by Tunisia (score: 3.92) and followed by only Egypt (score: 3.67) and Yemen (score: 2.74). Arab World Performance across Different Measures of Economic Development Country Global Competitiveness Inclusive Networked Development Readiness Enabling Trade Doing Business United Arab Emirates 5.26 N/A Qatar 5.23 N/A Saudi Arabia 4.84 N/A Kuwait 4.53 N/A Bahrain 4.47 N/A Jordan Oman 4.28 N/A Morocco Algeria 3.98 N/A Tunisia Lebanon 3.84 N/A Egypt Yemen N/A Source: World Economic Forum, Credit Libanais Economic Research Unit Arab World Performance across Selected Pillars of Competitiveness Country Macroeconomic Labor Technological Business Environment Market Readiness Sophistication Innovation United Arab Emirates Qatar Saudi Arabia Kuwait Bahrain Jordan Oman Morocco Algeria Tunisia Lebanon Egypt Yemen Source: World Economic Forum, Credit Libanais Economic Research Unit The report also added that while surveying the youth s view of the current situation in the region, government accountability and transparency was seen as the most serious issue affecting the Arab world with 48.53% of responders expressing that same concern. Moreover, 49.68% of young Arabs considered the abuse of power and corruption as the major factor of frustration towards governments in the Arab world. Finally, 49.47% of the Arab youth classified start-up ecosystem and entrepreneurship as the most important factor for youth empowerment in the region. To sum up, the report identified four key challenges that the Arab world inevitably needs to address in order to keep pace with the rapidly evolving world. In this scope, it is necessary that Arab nations reduce their dependence on natural resources and diversify their economies, increase the role of the private sector and minimize government interventions in their markets, create opportunities for their youth and support their workforces, and improve the innovation ecosystem. SOURCE: WORLD ECONOMIC FORUM, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 1

5 UNDP SUPPORTS LEBANON S RENEWABLE ENERGY PROJECTS The Global Environmental Finance Unit (GEF) at the United Nations Development Programme (UNDP) recently published its Annual Performance Report 2016 in which it spotted the light on a series of green projects that were approved or implemented by the UNDP during the year More specifically, the report focused on 810 active environmental projects in 143 countries across the globe with a total investment value of $3.1 billion. 55 of said projects ($188 million) were already fully completed and in their terminal evaluation stage as of 2016, while 669 projects ($2.4 billion) were still under implementation, and the remaining 86 ($543 million) consisted of recently approved projects. The region that benefited most from such projects was Asia and the Pacific, which hosted a total of 214 projects allocated over 35 countries and received grants of an amount of $971 million, followed by Africa (198 projects; 46 countries; $781 million), and Latin America & the Caribbean (186 projects; 30 countries; $596 million). This is further elaborated in the table below: Regional Breakdown of Most UNDP Environmental Projects in 2016 Region Total Grant Number of Number of Amount ($ Projects Countries Million) Africa Arab States Asia & the Pacific Europe & C entral Asia Latin America & the C aribbean Source: UNDP, Credit Libanais Economic Research Unit According to the report, many of these projects were financed by environmental vertical funds such as the Green Climate Fund, noting that the UNDP s cooperation with such funds has been playing a fundamental role in mutating international markets, enhancing the resilience of vulnerable groups, and strengthening countries capability of protecting their natural capital, which largely contributes to sustainable development. In figures, the total value of resources that were mobilized since the year 1992 aggregated to $6.6 billion by end of 2016, the main source of which was the GEF Trust ($5.42 billion), followed, and at quite a distance, by the Least Developed Countries Fund (LDCF) ($539 million), the Green Climate Fund (GCF) ($350 million), some additional funding labeled as cost-sharing channeled by the respective governments of Australia, Austria, Brittany, Canada, Denmark, Flanders, Norway, Switzerland, the United States, and the European Commission for GEF-funded projects that have already been approved ($156 million), the Adaptation Fund ($135 million), the Special Climate Change Fund (SCCF) ($82 million), and the Nagoya Protocol Implementation Fund (NPIF) ($7 million). On the local front, the UNDP has been supporting Lebanon s journey towards the adoption of renewable energy methods to generate electrical power by helping the Lebanese Customs and the Industrial Research Institute regulate the import of solar photovoltaic equipment while abiding by international quality standards. The UNDP has also been cooperating with the Lebanese Ministry of Environment, the CEDRO Project, and other concerned parties to lower the cost of producing electricity through solar and wind energy to compete with fossil fuel-based energy. In this context, the report cited four active UNDP environmental projects in Lebanon in the year 2016, namely the Third National Communications to the UNFCCC, the Sustainable Land Management in the Qaroun Watershed, the Small Decentralized Renewable Energy Power Generation, and the Second Biennial Update Report. It is worth noting that all four projects are financed by the Global Environment Facility (also known as GEF; a vertical fund focused on global environmental issues). Project Grant Amount Cumulative Disbursement Additional Co- Financing The Third National Communications to the UNFCCC $500,000 $498,392 - The Sustainable Land Management in the Qaroun Watershed $3,287,671 $131,177 $18,050,000 The Small Decentralized Renewable Energy Power Generation $1,500,000 $402,208 $11,616,000 The Second Biennial Update Report $352,000 $19,535 $50,000 Source: UNDP, Credit Libanais Economic Research Unit SOURCE: UNDP, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 2

6 OCCUPANCY RATE IN LEBANON S HOSPITALITY SECTOR AT 69% IN APRIL 2017 Ernst & Young (EY) published its Middle East Hotel Benchmark Survey Report on the performance of 4 and 5 star hotels in the Middle East region, conveying a 13.2 percentage-point annual increase in the average occupancy rate in Beirut s hospitality sector to 68.8% during the month of April Concurrently, the average room rate rose by 14.0% y-o-y to $148, with the average room yield appreciating by 40.9% to $102. Performance of Beirut's Hospitality Sector During the Month of Apr-2016 Apr-2017 Change Hotel Occupancy Rate (%) pctg points Average Room Rate (USD) % Rooms Yield (USD) % Source: Ernst & Young, Credit Libanais Economic Research Unit The following chart captures the monthly evolution in the occupancy rate in Beirut s 4 & 5 star hotels over the April April 2017 period: 80% Monthly Evolution of Hotel Occupancy in Beirut 70% 66% 63% 70% 65% 64% 67% 69% 60% 63% 62% 50% 55% 54% 57% 40% 44% 30% Source: Ernst & Young, Credit Libanais Economic Research Unit On a regional basis, Beirut recorded the 5 th highest (63.4%) occupancy rate among covered Middle Eastern capitals during the first four months of Abu Dhabi outperformed the region, recording an average occupancy rate of 82.1%, followed by Muscat (77.4%) and Doha (71.3%), only to name a few. In a related note, Kuwait City s 4 and 5 star hotels charged the highest average room rate ($237), right ahead of their likes in Manama ($211), Doha ($185), Riyadh ($174), Muscat ($169), Amman ($147), Beirut ($142), Abu Dhabi ($131), and Cairo ($84). Middle East Hotel Benchmark Survey During the Period Ended Hotel Occupancy Rates (%) Average Room Rates (USD) Room Yields (USD) Country - Capital Apr-2016 Apr-2017 Change in % Pts Apr-2016 Apr-2017 % Change Apr-2016 Apr-2017 % Change Bahrain - Manama % % Egypt - Cairo City % % Jordan - Amman % % Kuwait - Kuwait City % % Lebanon - Beirut % % Oman - Muscat % % Qatar - Doha % % Saudi Arabia - Riyadh % % United Arab Emirates - Abu Dhabi % % Source: Ernst & Young - Middle East Hotel Benchmark Survey, Credit Libanais Economic Research Unit Hotel Occupancy Rate in the Middle East Region YTD April 2017 Average Room Rate in the Middle East YTD April 2017 (USD) Amman Manama Kuwait City Riyadh Beirut Cairo Doha Muscat 48.5% 54.9% 56.8% 59.9% 63.4% 70.4% 71.3% 77.4% Cairo Abu Dhabi Beirut Amman Muscat Riyadh Doha Manama Abu Dhabi 82.1% Kuwait City % 20.0% 40.0% 60.0% 80.0% 100.0% Source: Ernst & Young, Credit Libanais Economic Research Unit Source: Ernst & Young, Credit Libanais Economic Research Unit SOURCE: ERNST & YOUNG, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 3

7 VALUE OF REAL ESTATE SALE TRANSACTIONS UP BY 8.94% Y-O-Y BY APRIL 2017 Real estate activity contracted during the fourth month of the current year, with the number of transactions plunging by 21.30% in April 2017 to 5,885, down from 7,478 transactions in March. In parallel, the value of real estate transactions dropped by 32.04% to $ million during the month of April, from $1.07 billion in the previous month. As a result, the average value per transaction fell by 13.65% to $123,270, from $142,756 in March. On a cumulative basis however, the number of real estate transactions rose by 12.51% y-o-y to 22,966 by the end of the first four months of this year, compared to 20,413 transactions during that same period last year, with the value of transactions increasing by 8.94% from $2.81 billion to $3.07 billion. Consequently, the average value per transaction shed 3.17% y-o-y to $133,463 by the end of April 2017, down from $137,832 a year before. The share of sales to foreigners stood at 1.66% by April, remaining below the 1.75% level reported in the full year Real Estate Transactions For the Month of March 2017 For the Month of April 2017 Monthly % Change YTD April 2016 YTD April 2017 Y-O-Y % Change Number of Sale Transactions 7,478 5, % 20,413 22, % Value of Transactions (USD Billion) % % Average Value per Transaction (USD) 142, , % 137, , % Source: General Directorate of Land Registry and Cadastre, Credit Libanais Economic Research Unit 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 Evolution of Value & Volume of Real Estate Transactions ,622 94, ,984 74,569 69,198 70,721 Source: GDLRC, Credit Libanais Economic Research Unit $ Billion , , , YTD April 2017 Value of Transactions ($ Billion) Number of Transactions The average value per real estate transaction in Beirut fell by 6.92% to $484,107 as at the end of the first four months of 2017, down from $520,076 at year-end Similarly, the average value per transaction in Baabda region edged 4.50% lower to $139,805, down from $146,400 by year-end On the other hand, the average value per transaction in each of the Metn and Kesserwan regions rose by 2.49% and 8.33% respectively to $218,624 and $137,737 at end of April 2017, up from $213,312 and $127,144 as at end of % 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% 2.53% Sales to Foreigners as a Percentage of Total Sales 2.04% 1.84% 1.86% 1.85% 1.69% 2.20% 1.75% 1.66% YTD April 2017 Source: GDLRC, Credit Libanais Economic Research Unit Historical Evolution of Average Value per Transaction across Different Lebanese Regions YTD Apr $139,805 $137,737 $146,400 $127,144 $218,624 $213,312 $484,107 $520, $134,728 $140,169 $205,516 $509, $138,644 $139,612 $210,955 $567, $120,983 $124,664 $213,584 $499, $108,028 $117,596 $182,797 $524, $100,712 $97,487 $170,953 $456, $103,397 $94,325 $153,064 $369, $78,245 $84,290 $118,546 $314,941 $0 $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 Baabda Kesserwan Metn Beirut Source: GDLRC, Credit Libanais Economic Research Unit SOURCE: GDLRC, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 4

8 LEBANESE TREASURY BILLS DOMESTIC PORTFOLIO VALUE UP BY 1.1% IN Q According to the Lebanese Ministry of Finance s Debt and Debt Markets quarterly report, Lebanon s gross public debt widened by 3.0% during the first quarter of 2017 to LBP 116,333 billion ($77.17 billion), up from LBP 112,911 billion ($74.90 billion) in More particularly, the government s outstanding local currency debt rose by 1.1% in Q to LBP 71,299 billion ($47.30 billion), up from LBP 70,528 billion ($46.78 billion) at year-end Lebanese commercial banks detained the lion s share of the government s local currency Treasury bills portfolio (45.3%), followed by Banque du Liban, which controlled a stake of 39.3%, and public institutions, which amassed 12.4%, as illustrated in the table hereunder: Breakdown of Domestic T-Bills Outstanding by Investor Type Dec-2011 Dec-2012 Dec-2013 Dec-2014 Dec-2015 Dec-2016 Mar-2017 BDL 33.1% 30.0% 30.6% 32.2% 37.4% 42.9% 39.3% Commercial Banks 51.1% 54.3% 53.0% 50.8% 45.7% 41.8% 45.3% Public Institutions 13.3% 12.9% 12.7% 12.5% 13.0% 12.4% 12.4% Others 2.5% 2.8% 3.8% 4.4% 3.9% 3.0% 3.0% Source: The Lebanese M inistry of Finance, Credit Libanais Economic Research Unit As far as the maturity spectrum is concerned, the pie below depicts that the bulk (96.2%) of Lebanon s outstanding Treasury bills portfolio is long-term in nature (in excess of one year), addressing as such the government s long term borrowing needs on the one hand, and lenders pursuit of attractive yields on the other, amid the scarcity of lucrative placement opportunities for banks in international financial and money markets. The share of T-bonds having a tenure of seven years and above stood at 46.4% of the total outstanding Treasury bills portfolio as at end of March 2017, with bonds having a tenor of five years representing 23.8% of the portfolio value, followed by the three-year (17.8%) and two-year to maturity (8.2%) T-bonds. The share of short-term Treasury bills represented a small proportion of 3.9% of the outstanding Treasury bills portfolio. Breakdown of Domestic T-Bills Outstanding by Tenor as at End of March Month & Above Notes 46.4% Short Term T-bills 3.9% 24-Month Notes 8.2% 36-Month Notes 17.8% 60-Month Notes 23.8% Source: MOF, Credit Libanais Economic Research Unit From another standpoint, foreign currency debt increased by 6.3% since the beginning of the year to LBP 45,034 billion ($29.87 billion) as at end of March 2017, up from LBP 42,383 billion ($28.11 billion) at yearend Eurobonds constituted the bulk (92.96%) of foreign currency debt, followed, and at quite a distance, by multilateral loans (3.71%) and bilateral facilities (2.14%), only to name a few. As far as the currency breakdown of multilateral and bilateral loans is concerned, Kuwaiti Dinar denominated loans accounted for 30.22%, followed closely by U.S. Dollar denominated (28.69%) and Euro denominated (27.33%) loans. Sector wise, the vast majority (27.72%) of said loans was directed to the water sector, followed by government & general technical services (22.64%), and the transportation sector (18.51%), only to name a few. Breakdown of Multilateral and Bilateral Loans by Currency as at End of March 2017 Breakdown of Multilateral and Bilateral Loans by Sector as at End of March 2017 Islamic Dinar, 7.66% Saudi Arabian Riyal, Others, 3.71% 2.39% USD, 28.69% Health, 7.57% Power, 11.08% Others, 12.48% Water, 27.72% Kuwaiti Dinar, 30.22% Euro, 27.33% Transportation, 18.51% General and Technical Government Services, 22.64% SOURCE: MINISTRY OF FINANCE, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 5

9 INDUSTRIAL EXPORTS DROP BY 12% Y-O-Y BY FEBRUARY 2017 According to the Lebanese Ministry of Industry, Lebanon s industrial exports rose by 11.88% during the month of February 2017 to $196.8 million, compared to $175.9 million in January. On a cumulative basis, however, industrial exports fell by 11.77% y-o-y to $372.6 million in the first two months of the current year, down from $422.3 million during that same period last year. Concurrently, industrial imports shed 25.59% y-o-y to $31.7 million YTD February 2017, compared to $42.6 million a year earlier. For the Two-Month Period Ending Y-O-Y (USD Million) Feb-2016 Feb-2017 % Change Industrial Exports % Industrial Imports of Equipment & Machinery % Source: Lebanese Ministry of Industry, Credit Libanais Economic Research Unit Evolution of Industrial Exports Evolution of Industrial Imports of Equipment & Machinery $ Million YTD Feb-2014 YTD Feb-2015 YTD Feb-2016 YTD Feb-2017 Source: Ministry of Industry, Credit Libanais Economic Research Unit $ Million YTD Feb-2014 YTD Feb-2015 YTD Feb-2016 YTD Feb-2017 Source: Ministry of Industry, Credit Libanais Economic Research Unit Exports of machinery and electrical equipment accounted for the bulk (21.47%; $80.0 million) of the total exports bill, followed by prepared foodstuffs and tobacco ($72.6 million <19.48%>) and products of the chemical industries ($59.5 million <15.97%>). On the imports front, Italy led the list of countries exporting to Lebanon ($9.2 million <29.17%>), followed by China ($6.3 million <19.88%>) and Germany ($4.3 million <13.68%>) as elaborated in the section below: Breakdown of Industrial Exports by Product YTD February 2017 Product Value ($ Million) Machinery and Electrical Equipment 80.0 Prepared Foodstuffs and Tobacco 72.6 Products of the Chemical Industries 59.5 Base Metals and Articles of Base Metal 51.2 Paper & Paperboard & Articles Thereof 23.4 Others 85.9 Total Industrial Exports Source: Lebanese M inistry of Industry, Credit Libanais Economic Research Unit Paper & Paperboard & Articles Thereof 6.28% Others 23.05% Base Metals and Articles of Base Metal 13.74% Breakdown of Industrial Exports by Product YTD February 2017 Products of the Chemical Industries 15.97% Machinery and Electrical Equipment 21.47% Prepared Foodstuffs and Tobacco 19.48% Breakdown of Industrial Imports of Equipment & Machinery by Country of Origin YTD February 2017 Country Value ($ Million) Italy 9.2 China 6.3 Germany 4.3 France 1.5 Turkey 1.2 Others 9.1 Total Industrial Imports 31.7 Source: Lebanese M inistry of Industry, Credit Libanais Economic Research Unit Turkey 3.66% Breakdown of Imports of Equipment & Machinery by Country YTD February 2017 France 4.77% Others 28.85% Germany 13.68% Italy 29.17% China 19.88% SOURCE: MINISTRY OF INDUSTRY, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 6

10 ECONOMIC ACTIVITY SLIGHTLY IMPROVES IN Q The Lebanese Central Bank released its Business Survey report for the third quarter of 2016 in which it assesses a set of macroeconomic indicators based on the opinions of corporate managers through a poll addressing the performance of their respective businesses. The assessment of each macroeconomic indicator relies on a balance of opinions, which consists of the difference between the proportion of managers estimating a certain improvement and those perceiving a contraction in the related variable. In detail, the report conveyed some progress in the balance of opinions with regards to industrial production to -4% in the third quarter of 2016, in comparison with a -9% balance reported in Q2-2016, and a -5% balance in Q In parallel, the report showed an improvement in the balance of opinions pertaining to total demand in the industrial sector to -7%, from -12% in Q2-2016, with the foreign demand balance also advancing to -15%. The volume of investments balance, however, slightly deteriorated to -8%. Despite the aforementioned improvements, managers in the industrial sector remain rather pessimistic given the persisting negative balances. Balance of Opinions Third Quarter of 2015 Second Quarter of 2016 Third Quarter of 2016 Industry Production -5% -9% -4% Total Demand -11% -12% -7% Foreign Demand -23% -19% -15% Vol. of Investments -13% -7% -8% Commerce Volume of Sales -2% -18% -5% Construction & Public Work General Activity -20% -42% -10% Construction -25% -40% -13% Public Work -14% -37% -14% Source: BDL, Credit Libanais Economic Research Unit On the commerce front, managers presumed a stuttering activity during the third quarter of 2016 despite the narrowing negative gap between managers whose perceptions are optimistic and those who estimated a slowdown in commerce activity. More specifically, the balance of opinions for commerce activity in terms of volume of sales rose to -5% in Q3-2016, in comparison with -18% in Q On the construction & public works front, the balance of opinions of managers for general activity and construction sharply increased to -10% and -13% on a respective basis (up from -42% and -40% on a respective basis in the previous quarter). The balance of opinions regarding the public work metric similarly showed a smaller gap of -14%, compared to -37% in the second quarter of From a regional perspective, the balance of opinions of interviewed managers surrounding industrial, commerce, and construction & public work activities in the Beirut and Mount Lebanon region was entirely negative, unlike the South poll results, which showed positive balance of opinions across almost all economic sectors. Balance of Opinions - Third Quarter of 2016 Industry Beirut & Mount- Lebanon North South Bekaa Production -25% 1% 30% 20% Total Demand -28% 0% 18% 17% Foreign Demand -21% -15% -69% 19% Vol. of Investments -13% -12% 3% -1% Commerce Volume of Sales -27% 18% 27% 23% Construction & Public Work General Activity -29% 38% 18% -31% Construction -28% 20% 18% -29% Public Work -23% 24% 0% -26% Source: BDL, Credit Libanais Economic Research Unit SOURCE: BDL, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 7

11 LEBANESE BANKS SUBSIDIZED LOANS PORTFOLIO AT $ MILLION BY END OF Q Lebanese banks subsidized loans portfolio settled at $ million in the first nine months of 2016, compared to $ million in the full year It is worth noting that the cumulative face value of these subsidized loans aggregated to $6.89 billion over the period extending between 1997 and September As for the breakdown of subsidized loans by sector, the industrial sector continued to control the lion s share ($ million <54.32%>) of total loans, followed by the tourism ($ million <31.73%>) and agricultural ($57.38 million <13.95%>) sectors. In Millions of USD Sep-2016 Industry Tourism Agriculture Total Subsidized Loans Source: Banque Du Liban - Quarterly Report, Credit Libanais Economic Research Unit Evolution of Subsidized Loans (USD Million) Tourism 31.73% Composition of Subsidized Loans by Sector up to Q Agriculture 13.95% Industry 54.32% Source: BDL, Credit Libanais Economic Research Unit Source: BDL, Credit Libanais Economic Research Unit Medium and long-term loans accounted for 80.71% ($ million) of the total subsidized loans portfolio up to the third quarter of 2016, followed by Kafalat loans ($70.85 million <17.23%>) and loans extended through leasing companies ($8.49 million <2.06%>). This is further elaborated in the table below: In Millions of USD Sep-2016 Subsidized Medium & Long Term Kafalat EIB IFC Leasing Companies Others Total Source: Banque Du Liban - Quarterly Report, Credit Libanais Economic Research Unit Breakdown of Subsidized Loans by Type of Loan up to Q Kafalat 17.23% Leasing Companies 2.06% Subsidized Medium & Long Term 80.71% Source: BDL, Credit Libanais Economic Research Unit SOURCE: BDL, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 8

12 FINANCIAL SECTOR S UTILIZED CREDITS REACH $63.54 BILLION AS AT Q According to Central Bank statistics, the financial sector s utilized credits rose by 6.50% y-o-y to just below LBP 95,783 billion ($63.54 billion) as at end of the third quarter of 2016, up from LBP 89,936 billion ($59.66 billion) as at end of Q The breakdown of utilized credits by type of facility reveals a sizeable concentration in the form of Advances Against Real Estate ($23.28 billion <36.63%>), followed by Overdrafts ($17.72 billion <27.89%>), Advances Against Personal Guarantees ($11.79 billion <18.56%>), Advances Against Cash Collaterals / Bank Guarantees ($7.23 billion <11.38%>), Advances Against Other Real Guarantees ($2.37 billion <3.73%>), and Advances Against Financial Values ($1.15 billion <1.81%>). The total number of utilized credit transactions stood at 588,424 by end of Q3-2016, implying an average credit balance of around LBP million ($107,979) per credit line. Distribution of the Financial Sector's Utilized Credits by Type of Credit $ Million Q Q Y-O-Y % Change Advances Against Cash Collateral/Bank Guarantees 6, , % Advances Against Financial Values 1, , % Advances Against Real Estate 20, , % Advances Against Other Real Guarantees 2, , % Advances Against Personal Guarantees 11, , % Overdrafts 17, , % Total 59, , % Source: BDL Quarterly Bulletin, Credit Libanais Economic Research Unit Advances Against Cash Collateral/Bank Guarantees, 11.38% Advances Against Personal Guarantees, 18.56% Distribution of Total Utilized Credits by Type as at Q Advances Against Other Real Guarantees, 3.73% From a sectoral breakdown perspective, the Trade & Services sector enjoyed the lion s share ($20.51 billion <32.29%>) of total utilized credits, followed by Personal Loans ($19.49 billion <30.68%>) and loans to the Construction sector ($11.40 billion <17.94%>). As for the distribution of utilized credits by number of borrowers, the number of Personal Loans beneficiaries topped the list of borrowers (87.50% of total borrowers), followed by Trade & Services (8.55%) and borrowers in the Industrial sector (2.40%). Overdrafts, 27.89% Advances Against Financial Values, 1.81% Source: BDL Quarterly Bulletin, Credit Libanais Economic Research Unit Advances Against Real Estate, 36.63% Distribution of the Financial Sector's Utilized Credits by Sector $ Million Q Q Y-O-Y % Change Agriculture % Industry 6, , % Construction 10, , % Trade & Services 20, , % Financial Intermediation 3, , % Individuals 17, , % Others 1, , % Total 59, , % Source: BDL Quarterly Bulletin, Credit Libanais Economic Research Unit Industry, 10.02% Construction, 17.94% Distribution of Total Utilized Credits by Sector as at Q Financial Intermediation, 5.41% Others, 2.48% Agriculture, 1.19% Individuals, 30.68% Source: BDL Quarterly Bulletin, Credit Libanais Economic Research Unit Trade & Services, 32.29% From a geographical distribution standpoint, the Beirut & Suburbs region amassed the highest concentration of commercial banks utilized credits, detaining a share of 75.95% of total commercial banks credits as at end of Q3-2016, followed by the Mount Lebanon (12.04%), South (4.73%), North (4.19%), and Bekaa (3.09%) regions. Geographical Distribution of Commercial Banks' Credits Geographical Distribution of Commercial Banks' Credits as at Q Q Q Beirut and Suburbs 76.74% 75.95% Mount Lebanon 11.64% 12.04% South 4.51% 4.73% North 4.06% 4.19% Bekaa 3.05% 3.09% Total 100% 100% Source: BDL Quarterly Bulletin, Credit Libanais Economic Research Unit South, 4.73% North, 4.19% Bekaa, 3.09% Mount Lebanon, 12.04% Beirut and Suburbs, 75.95% Source: BDL Quarterly Bulletin, Credit Libanais Economic Research Unit SOURCE: BDL, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 9

13 LEBANON S BALANCE OF TRADE DEFICIT WIDENS TO $4.22 BILLION IN Q On the current account side of the balance of payments, Lebanon s balance of trade deficit widened by $233 million on an annual basis to just above $4.22 billion as at the end of the first quarter of 2017, up from around $3.99 billion in the same quarter last year, according to statistics published by Lebanon s Higher Customs Council. Said increase in the deficit was triggered by a $329 million y-o-y expansion in imports to over $4.95 billion, which outweighed the $96 million rise in exports to $730 million. Balance of Trade For the Three-Month Period Ending Y-O-Y (US$ Million) Mar-2016 Mar-2017 % Change Exports % Imports 4,622 4, % Trade Balance (3,988) (4,221) 5.85% Source: Higher Customs Council, Credit Libanais Economic Research Unit USD Million 6,000 4,000 2,000 Balance of Trade Deficit 0-2,000 Mar-2016 Mar ,000-6,000 Exports Imports Deficit Source: Higher Customs Council, Credit Libanais Economic Research Unit China topped the list of countries exporting to Lebanon, with its exports bill reaching $433 million (8.74% of Lebanon s imports). South Africa, on the other hand, led the list of countries importing from Lebanon, with its imports invoice aggregating to $105 million (14.43% of Lebanon s exports). This is further elaborated in the tables below: Major Import Sources (in USD Million) China % Greece % Italy % U.S.A % Germany % Source: Higher Customs Council, Credit Libanais Economic Research Unit Major Export Destinations (in USD Million) South Africa % Syria % U.A.E % Saudi Arabia % Iraq % Source: Higher Customs Council, Credit Libanais Economic Research Unit Exports of pearls, precious or semi-precious stones and metals accounted alone for 24.46% ($179 million) of total Lebanese exports by March 2017, followed by prepared foodstuffs, beverages, & tobacco ($113 million <15.44%>), machinery & mechanical appliances and electrical equipment ($82 million <11.27%>), and base metals and articles of base metal ($81 million <11.16%>). On the other hand, mineral products constituted the lion s share of imported goods ($1,200 million <24.24%>), trailed, and by far, by chemical products ($528 million <10.67%>), machinery & mechanical appliances and electrical equipment ($451 million <9.10%>), and vehicles, aircraft, vessels and associated transport ($414 million <8.36%>). Breakdown of Exports by Product YTD March 2017 Value Product ($ Million) Pearls, Precious or Semi-Precious Stones and Metals Prepared Foodstuffs, Beverages, Tobacco Machinery and Mechanical Appliances, Electrical Equipment Base Metals and Articles of Base Metal % of Total % % % % Others % Total Exports % Source: Higher Customs Council, Credit Libanais Economic Research Unit Product Breakdown of Imports by Product YTD March 2017 Value ($ Million) % of Total Mineral Products 1, % Chemical Products % Machinery and Mechanical Appliances, Electrical Equipment % Vehicles, aircraft, vessels and associated Transport % Others 2, % Total Imports 4, % Source: Higher Customs Council, Credit Libanais Economic Research Unit SOURCE: HIGHER CUSTOMS COUNCIL, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 10

14 LEBANON S ANNUAL INFLATION AT 4.44% IN APRIL 2017 According to the Central Administration of Statistics (CAS), Lebanon s monthly inflation, as captured by the change in the consumer price index (CPI), stood at 0.12% in April 2017, compared to 0.66% in March. On an annual basis, Lebanon s CPI rose by 4.44% to in April of the current year, from a year earlier. Said annual increase was mainly buoyed by the 12.68% surge in the prices of water, electricity, gas and other fuels (11.80% weight in the index), coupled with the 4.44% hike in the prices of food & nonalcoholic beverages (20.00% weight in the index), and the 15.41% rise in the prices of clothing & footwear (5.20% weight in the index), among others, which altogether outweighed the 2.34% drop in healthcare prices (7.70% weight in the index). The following section captures the fluctuation in Lebanon s consumer basket s key constituents: Price Volatility Monthly (March April 2017) % change Annual (April April 2017) % change Weight Food & Non-Alcoholic Beverages 0.07% 4.44% 20.00% Alcoholic Beverages & Tobacco 0.32% 6.77% 1.40% Clothing & Footwear 6.75% 15.41% 5.20% Housing - Actual Rent 0.09% 6.14% 2.90% Housing - Owner Occupied 0.04% 3.21% 13.60% Housing - Water, Electricity, Gas and Other Fuels -1.14% 12.68% 11.80% Furnishings, Household Equipment & Routine Household Maintenance -0.43% 1.52% 3.80% Health -0.74% -2.34% 7.70% Transportation -0.55% 5.31% 13.10% C ommunication 0.00% 0.45% 4.50% Recreation, Amusement, and Culture -0.04% 3.43% 2.40% Education 0.00% 2.65% 6.60% Restaurant & Hotels 0.30% 2.13% 2.80% Miscellaneous Goods & Services 0.24% 1.86% 4.10% Consumer Price Index 0.12% 4.44% % Source: Central Administration of Statistics, Credit Libanais Economic Research Unit On a geographical basis, only the Bekaa and the Nabatieh regions witnessed a monthly contraction in their CPI values in April by 0.29% and 0.10% respectively. On the other hand, the North region reported the sharpest monthly rise (0.45%) in its CPI reading, followed by the South (0.36%), Beirut (0.09%) and Mount Lebanon (0.06%) regions. April 2017 Inflation Across Regions Region Monthly Inflation Weight Beirut 0.09% 10.80% Mount Lebanon 0.06% 47.20% North 0.45% 18.00% Bekaa -0.29% 9.20% South 0.36% 8.70% Nabatieh -0.10% 6.10% Lebanon 0.12% % Source: Central Administration of Statistics, Credit Libanais Economic Research Unit The following chart captures the evolution of the yearly change in CPI values since December 2009: Evolution of Yearly Change in CPI 10% 10.10% 7% 4.60% 4.44% 4% 1% 3.40% 3.10% 1.10% 3.14% Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16-2% -1.43% -3.40% -5% SOURCE: CAS, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 11

15 NUMBER OF TOURISTS INCREASES BY 17.45% Y-O-Y BY APRIL 2017 According to figures released by the Lebanese Ministry of Tourism, the number of tourists arriving to Lebanon amounted to 158,637 during the month of April 2017 compared to 129,859 arrivals in March. The year 2017 s reading for the month of April also came higher by 29.57% than the 122,431 reading registered in April Moreover, on a cumulative basis, the number of tourists arriving to the country rose by 17.45% y-o-y to 503,805 up to April 2017, from 428,947 tourists a year earlier. Arab visitors topped the list of tourists arriving to Lebanon, accounting alone for 35.69% (179,828 visitors) of total tourists arrivals, followed by European (163,002 arrivals <32.35%>), American (69,950 arrivals <13.88%>), and Asian (41,910 arrivals <8.32%>) visitors. Tourist Arrivals to Lebanon YTD April 2017 Arab 179,828 European 163,002 American 69,950 Asian 41,910 Asian 8.32% Others 9.75% Arab 35.69% Others 49,115 Total 503,805 Source: M inistry of Tourism, Credit Libanais Economic Research Unit American 13.88% Tourist Arrivals by Nationality YTD April 2017 European 32.35% Source: Ministry of Tourism, Credit Libanais Economic Research Unit Cumulative Evolution of Number of Tourists 600, , , , , , , , , , , , ,000 0 Apr 2011 Apr 2012 Apr 2013 Apr 2014 Apr 2015 Apr 2016 Apr 2017 Source: Ministry of Tourism, Credit Libanais Economic Research Unit SOURCE: MINISTRY OF TOURISM, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 12

16 CORPORATE NEWS BANK AUDI EGYPT S NET PROFITS AT $11.59 MILLION IN Q Bank Audi S.A.E., the Egyptian affiliate of Bank Audi S.A.L., published its un-audited financial statements for the first quarter of 2017, reporting a 26.54% year-on-year drop in its net after tax profits to EGP million ($11.59 million), down from EGP million ($32.39 million) in Q In fact, the bank suffered other operating losses of EGP million ($0.63 million) compared to other operating income of EGP million in the same period last year, outweighing the 24.12% rise in net interest income to EGP million ($21.53 million) and the 43.20% rally in net commission & fee income to EGP million ($6.34 million). In a related note, total expenses (administrative expenses and impairment charges on credit losses) expanded by 16.11% to EGP million ($12.44 million). On the balance sheet front, Bank Audi S.A.E. s consolidated assets widened by 2.13% during the first quarter of 2017 to just over EGP billion ($3.10 billion), despite the 1.11% contraction in net loans to nearly EGP billion ($1.63 billion). On the funding side, customer deposits also shed 2.40% in Q to around EGP billion ($2.44 billion), with the ratio of net loans to customer deposits firming at 66.60%, compared to 65.73% as at year-end The bank s shareholders equity expanded to about EGP 4.70 billion ($ million) by end of Q1-2017, from EGP 4.65 billion as at end of year It is worth noting that the growth rates of major balance sheet and income statement parameters would turn negative if converted to U.S. Dollar-equivalent on the back of the drastic deprecation of the Egyptian pound against the greenback. Bank Audi Egypt As at end of 2016 In Millions of EGP March 2017 % Change Key Balance Sheet Figures Total Assets 55, , % Net Loans and Facilities 29, , % Customer Deposits 45, , % Shareholders' Equity 4, , % Liquidity Ratios (%) Net Loans to Customer Deposits 65.73% 66.60% In Millions of EGP Q Q % Change Key P&L Figures Net Interest Income % Net Commission and Fee Income % Impairment Charges on Credit Losses % Administrative Expenses % Other Operating Income % Net Profits % Source: BSE, Bank Audi, Credit Libanais Economic Research Unit Evolution of Bank Audi Egypt's Profitability Millions of EGP Q Q SOLIDERE TO DELIST ITS GDRS FROM THE LONDON STOCK EXCHANGE According to an announcement issued by the Lebanese Company for the Development and Reconstruction of the Beirut Central District (Solidere) S.A.L. and circulated by the Beirut Stock Exchange (BSE) on May 26, 2017, the company has applied for the delisting of its Global Depository Receipts (GDRs) from the London Stock Exchange starting June 29, 2017 and to accordingly terminate the Deposit Agreements surrounding said GDRs with the Bank of New York Mellon. The company attributed its decision to the frail trading activity on its GDRs on the London Stock Exchange, in addition to the hefty costs borne by the company to maintain said listing. SOURCE: BSE, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 13

17 MONETARY PERFORMANCE MONETARY AGGREGATES The overall money supply, M4, widened by LBP billion during the week of May 11, 2017 to LBP 214,461 billion, noting that the non-banking sector s Treasury bills portfolio dropped by LBP 42 billion. In parallel, Lebanese-pound denominated deposits and currency in circulation, M1, slightly increased by LBP 1.17 billion week-on-week to LBP 9,639 billion on the back of some LBP 87 billion rise in demand deposits which outweighed the LBP 86 billion contraction in money in circulation. In contrast, local currency term deposits, M2, fell by LBP billion on a weekly basis, yet registered a 3.24% year-on-year increase to settle at LBP 82,268 billion. Consequently, private sector term and saving deposits denominated in LBP ( M2-M1 ) edged slightly lower to LBP 72,629 billion, while deposits denominated in foreign currencies ( M3-M2 ) firmed at LBP 121,550 billion. Money Supply LBP Billion May 4, 2017 May 11, 2017 % Change M1 9,638 9, % M2 82,281 82, % M3 203, , % M4 213, , % M2- M1 72,644 72, % M3- M2 121, , % Source: Banque Du Liban, Credit Libanais Economic Research Unit 250, , ,000 Money Supply - LBP Billion - 213, , , ,818 May 4, 2017 May 11, 2017 M4 M3 Source: BDL, Credit Libanais Economic Research Unit MONEY MARKETS The May 18 th Treasury bill auction raised LBP billion ($ million) compared to LBP billion ($ million) in the auction of the previous week. The majority of subscriptions (49.25%) was concentrated in the five-year to maturity T-bonds, followed by the one-year (26.02%) and three-month (24.74%) tenure treasury securities. Consequently, the weighted average yield on Lebanese Pound Treasury bills stood at 5.81% in the auction of May 18. The yields on the three-month, one-year, and five-year to maturity Treasury securities remained flat at 4.44%, 5.35%, and 6.74% respectively. Lebanese Treasury Bills May 18, 2017 Yield (%) Face Value (in billions of LBP) % of Total Face Value 3 Months 4.44% % 12 Months 5.35% % 60 Months 6.74% % Total % Source: Reuters, Credit Libanais Economic Research Unit Lebanese Treasury Bills 3 Months 6 Months 12 Months 24 Months 36 Months 60 Months 84 Months 120 Months Treasury Yield 4.44% 4.99% 5.35% 5.84% 6.50% 6.74% 7.08% 7.46% 8.00% 7.50% 7.00% 6.50% 6.00% On The Run Yield Curve 24 Months 36 Months 84 Months 60 Months 120 Months 5.50% 5.00% 6 Months 12 Months 4.50% 3 Months 4.00% 3.50% 3.00% SOURCE: BDL, REUTERS, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 14

18 LEBANESE EQUITIES LEBANESE EQUITIES Activity on the Beirut Stock Exchange remained thin this week in spite of the block trade on BLOM Bank listed shares involving more than 6.8 million shares. These large traded chunks on BLOM Bank fueled the number of shares changing hands on the BSE to 7,721,537 shares, compared to 8,737,951 shares last week. Traded value rose to $77.92 million, from $56.25 million a week before. Trading activity of listed banking stocks accounted for 98.91% of total weekly traded volume. Credit Libanais Week of Week of Weekly YTD Indices 19-May May-17 % Change % Change Credit Libanais Aggregate Stock Index <.CLASI> Credit Libanais Financial Sector Stock Index <.CLFI> Credit Libanais Construction Sector Stock Index <.CLCI> 1, , % -5.54% 1, , % -3.84% % % Credit Libanais Aggregate Stock Index Weekly Performance CLASI In parallel, the average daily trading volume rose to 1,930,384 shares this week, from 1,747,590 shares last week. Concurrently, the average daily trading value increased to $19.48 million, from $11.25 million a week earlier. Three losers and eight gainers were spotted this week, dragging the BSE s market capitalization down by 0.28% week-on-week to $11.58 billion and the Credit Libanais Aggregate Stock Index ( CLASI ) 0.39% lower to 1, In the real estate sector, trades mainly consisted of Solidere A and B shares (1.09% of total traded volume), with the price of Solidere A aprreciating by 1.94% to $8.95 and that of Solidere B increasing by 2.24% to $8.69. The Credit Libanais Construction Sector Stock Index ( CLCI ) ended its week 1.73% higher at In the banking sector, BLOM Bank listed shares amassed the highest concentration of trades (89.08% of total traded volume) on a turnover ratio of 3.20%. The Credit Libanais Financial Sector Stock Index ( CLFI ) ended its week 0.84% lower at 1, as a result of the 4.09% drop in the price of Bank Audi GDRs to $6.10 coupled with the 3.01% decrease in the price of Byblos Bank listed shares to $1.61 and the 1.48% contraction in the price of Bank Audi listed shares to $6.01 which outweighed the 0.93% increase in the price of BLOM Bank listed shares to $10.80 and the 0.85% appreciation in the price of BLOM Bank GDRs to $ Index Value 1,250 1,200 1,150 1,100 1,050 1,000 CLASI 0.39% 26-May Jul Sep Oct Dec Feb Apr-17.CLASI Credit Libanais Aggregate Stock Index Friday, May 26, 2017 Value Daily % Chng Daily Net Chng 1, % Yr.High Year Hi.Date Yr.Low Year.Lo.Date 1, Mar-17 1, Apr-17 Life High Life Hi.Date Life Low Life.Lo.Date 1, Jul Mar May-17 1,700 1,650 1,600 Credit Libanais Financial Sector Stock Index Weekly Performance CLFI Credit Libanais Construction Sector Stock Index Weekly Performance CLCI Index Value 1,550 1,500 1,450 Index Value , ,350 1, May Jul-16 CLFI 0.84% 07-Sep Oct Dec Feb Apr May May Jul-16 CLCI 1.73% 07-Sep Oct Dec Feb Apr May-17 SOURCE: BSE, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 15

19 LEBANESE EQUITIES BEIRUT STOCK EXCHANGE Closing Weekly %Change Weekly Volume Traded Solidere A $ % 42, % $373, % 100,000,000 $895, % Solidere B $ % 41, % $361, % 65,000,000 $564, % BLC Bank $ % ,033,333 $70, % BLC Bank Preferred Class "B" $ % ,000 $55,000 n.a n.a 0.00% BLC Bank Preferred Class "C" $ % ,000 $35,000 n.a n.a 0.00% BLC Bank Preferred Class "D" $ % % $20, % 750,000 $75,000 n.a n.a 0.00% Bank Audi - Listed Shares $ % 112, % $679, % 399,749,204 $2,402, % 8.32% 7.90% -3.71% Bank Audi GDR $ % 37, % $232, % 119,924,761 $731, % 8.20% 7.79% 1.63% Bank Audi Preferred "F" $ % ,500,000 $156,000 n.a n.a 1.46% 5.77% 5.48% 6.94% Bank Audi Preferred "G" $ % 2, % $239, % 1,500,000 $150,750 n.a n.a -1.66% 5.97% 5.67% 4.01% Bank Audi Preferred "H" $ % 1, % $120, % 750,000 $75,375 n.a n.a -1.76% 6.47% 6.14% 4.38% Bank Audi Preferred "I" $ % ,500,000 $251,250 n.a n.a 0.50% 2.99% 2.84% 3.34% Bank Of Beirut - Listed Shares $ % ,746,417 $333, % 3.53% 3.35% 3.35% Bank Of Beirut Priority Shares 2014 $ % 5, % 105, % 4,762,000 $100, % 7.16% 7.00% 7.00% Bank Of Beirut Preferred "H" $ % % 10, % 5,400,000 $135,810 n.a n.a -4.19% 6.96% 6.61% 2.42% Bank Of Beirut Preferred "I" $ % ,000,000 $125,750 n.a n.a -4.19% 6.71% 6.37% 2.18% Bank Of Beirut Preferred "J" $ % ,000,000 $78,750 n.a n.a 0.00% 6.19% 5.88% 5.88% Bank Of Beirut Preferred "K" $ % 7, % $183, % 4,000,000 $100,600 n.a n.a -0.40% 2.27% 2.15% 1.76% Byblos Bank - Listed Shares $ % 514, % $816, % 565,515,040 $910, % 8.24% 7.83% 2.53% Byblos Bank Preferred Class 2008 $ % % $76, % 2,000,000 $203,000 n.a n.a -1.07% 7.88% 7.49% 6.42% Byblos Bank Preferred Class 2009 $ % 2, % $215, % 2,000,000 $204,000 n.a n.a 0.69% 7.84% 7.45% 8.14% Byblos Bank GDR $ % ,309,078 $104, % 8.29% 7.88% 7.88% BEMO Bank - Listed Shares $ % ,400,000 $87, % BEMO Bank Preferred Class 2013 $ % ,000 $35,000 n.a n.a 0.76% BLOM Bank GDR $ % 75, % $894, % 73,896,010 $871, % 8.43% 8.01% 15.28% BLOM Bank Listed Shares $ % 6,878, % $73,594, % 215,000,000 $2,322, % 9.21% 8.75% 10.64% BLOM Bank Preferred Class 2011 $ % ,000,000 $207,000 n.a n.a 2.48% 6.76% 6.43% 8.90% RYMCO Class "B" $ % ,920,000 $35, % Holcim Liban $ % ,516,040 $241, % Ciment Blancs Bearer $ % ,000,000 $18, % Ciment Blancs Nominal $ % ,000,000 $4, % Note: n.a stands for not applicable Source: Beirut Stock Exchange, Credit Libanais Economic Research Unit % of Weekly Volume Traded Lebanese Equities % of Weekly Value Traded Weekly Value Traded Total Listed Shares Market Capitalisation ($000) P/E P/BV YTD Price Perf. Gross Dividend Yield Net Dividend Yield Evolution of Beirut Bourse Comparable Benchmarks YTD Total Net Return Activity Analysis Previous Last % Change Value Traded ($) 56,250,757 77,923, % Volume Traded 8,737,951 7,721, % Average Daily Trading Value ($) 11,250,151 19,480, % Average Daily Trading Volume 1,747,590 1,930, % Market Cap - BSE ($) 11,616,012,041 11,582,943, % Weighted Average P/E % Weighted Average P/BV % Source: Beirut Stock Exchange, Credit Libanais Economic Research Unit May 19, 2017 May 26, 2017 P/E P/BV Source: BSE, Credit Libanais Economic Research Unit The weighted average price to earnings (P/E) multiple of listed stocks ended its week higher at 8.700x while the weighted average price to book (P/BV) metric settled lower at 0.836x based on the closing prices of Friday s session. SOURCE: BSE, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 16

20 LEBANON S MAIN INDICATORS Recap of Lebanon's Major Indicators MACROECONOMIC INDICATORS GDP ($ Billion) * 50.81* 51.82* 53.37* Real GDP Growth Rate 8.00% 0.90% 2.80% 2.50% 2.00%* 1.00%* 1.00%* 2.00%* GDP Per Capita ($) 8,756 9,144 9,966 10,655 11,067* 11,157* 11,271* 11,497* Net Foreign Direct Investment ($ Billion) FDI/GDP Ratio 13.05% 8.48% 5.22% 7.97% INDUSTRY Industrial Exports ($ Million) 3,291 3,530 3,567 3,384 3,150 2,956 2, (3) Import of Industrial Machinery ($ Million) (3) TOURISM Total Number of Tourists 2,167,989 1,655,051 1,365,845 1,274,362 1,354,647 1,517,927 1,688, ,805 (5) Growth in Tax- Free Spending 21% 10% -6% 4% 8% 2% -9% 8% (3) REAL ESTATE Value of Real Estate Transactions ($ Million) 9,479 8,841 9,175 8,708 8,952 8,006 8,482 3,065 (5) Number of Real Estate Sales Transactions 94,202 82,984 74,569 69,198 70,721 63,386 64,248 22,966 (5) Construction Permits (000 sqm) 15,187 13,890 12,362 10,527 11,159 10,294 9,935 3,260 (5) Cement Delivery (000 tons) 5,227 5,550 5,309 5,831 5,517 5,043 5,265 1,069 (4) TRANSPORTATION Beirut Port: Freight Activity (000 Tons) 6,469 6,677 7,225 8,268 8,281 7,240 8,737 2,859 (6) Beirut Airport: Number of Passengers (million) (5) FOREIGN TRADE Imports ($ Million) 17,964 20,158 21,280 21,228 20,494 18,069 18,7 05 4,951 (4) Exports ($ Million) 4,253 4,265 4,483 3,936 3,313 2,952 2, (4) Trade Balance ($ Million) (13,711) (15,893) (16,797) (17,292) (17,181) (15,117) (15,729) (4,221) (4) BALANCE OF PAYMENTS Net Foreign Assets at the Financial Sector ($ Million) 3,325 (1,996) (1,537) (1,127) (1,407) (3,354) 1, (4) Foreign Assets ($ Billion) (7) PUBLIC FINANCE Government Expenditures ($ Million) 11,336 11,675 13,321 13,640 13,952 13,528 14,8 67 Government Revenues ($ Million) 8,414 9,333 9,396 9,420 10,879 9,576 9,923 Budget Primary Deficit / Surplus ($ Million) 1,203 1,662 (110) (240) 1, Total Deficit ($ Million) (2,894) (2,342) (3,925) (4,220) (3,073) (3,952) (4,944) Deficit / GDP Ratio 7.61% 5.84% 8.90% 8.87% 6.16% 7.78% 9.54% Debt Service / GDP Ratio 10.85% 9.99% 8.21% 7.96% 8.78% 9.21% 9.58% Net Public Debt ($ Billion) (4) Gross Public Debt/GDP Ratio % % % % % %* %* %* MONETARY AGGREGATES & INFLATION M4 ($ Billion) (6) (M2-M1) ($ Billion) (6) Monetization Level (M2/GDP Ratio) % 99.32% 99.44% 95.68% 97.40% % % Change in CPI (%) 6.19% 4.27% 4.68% 2.05% % % 3.14% 4.44% (5) BANKING SYSTEM Number of Commercial Banks (1) Number of Branches ,020 1,039 1,044 (1) Total Assets ($ Million) 128, , , , , , , ,755 (4) Total Deposits ($ Million) 108, , , , , , , ,605 (4) Loans to the Private Sector ($ Million) 34,929 39,375 43,452 47,381 50,899 54,224 57,180 57,181 (4) Customer Loans/ Deposits 32.16% 33.45% 34.04% 34.05% 34.48% 34.99% 34.35% 33.91% (4) Dollarization Rate 63.24% 65.92% 64.82% 66.14% 65.71% 64.88% 65.82% 66.13% (4) Exchange Rate (LBP to USD) 1, , , , , , , , * Figures Reflect IMF Estimates (1) As at End of June, 2016, (2) As at End of January, 2017, (3) As at End of February, 2017, (4) As at End of M arch, 2017, (5) As at End of April, 2017, (6) A s at M ay 11, 2017, (7) As at M id-m ay, 2017 SOURCE: BDL, ABL, MOF, IMF, CAS, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 17

21 LEBANON S RATINGS Republic Of Lebanon Sovereign Ratings Rating Agency Tenor Rating Standard & Poor's Global Ratings Long- Term B- Short- Term B Moody's Investors Service Long- Term B2 Fitch Ratings Long- Term B- Short- Term B- Source: S&P Global Ratings, M oody's Investors Service, Fitch Ratings Outlook Stable Negative Stable Lebanese Banks' Latest Ratings Rated Banks Moody's Investors Service Fitch Ratings S&P Global Ratings Long Term Foreign Currency Financial Strength Outlook Long Term IDR Outlook Long-Term Counterparty Credit Rating Short-Term Counterparty Credit Rating Outlook Bank Audi B2 E+ Negative B- Stable B- C Stable BLOM Bank B2 E+ Negative - - B- - Stable Credit Libanais Byblos Bank B2 E+ Negative B- Stable BBAC Fransabank BankMed B- C Stable Sources: Moody's Investors Service, Fitch Ratings, S&P Global Ratings SOURCE: S&P, MOODY S, FITCH, CREDIT LIBANAIS ECONOMIC RESEARCH UNIT 18

22 CONTACTS RESEARCH Fadlo I. Choueiri, CFA EXT: 1280 Jad Abi Haidar, CFA EXT Joelle Samaha EXT Mayda Zaarour EXT Nagham Abdel Ahad EXT MONEY MARKETS DESK Robert Araman EXT This document is being furnished to you solely for your information and may not be reproduced or redistributed to any other person. This document does not constitute an offer or invitation to subscribe to or purchase any security, and neither this document nor anything contained herein shall form the basis of any contract or commitment whatsoever. Reasonable care has been taken to ensure that the facts stated herein are accurate and the estimates, opinions and expectations contained herein are fair and reliable. ECONOMIC RESEARCH UNIT - ADLIEH, BEIRUT LEBANON - TEL: FAX: