According to Standard & Poor’s (S&P) latest report, the outlook on Lebanon was revised from negative to stable, and Lebanon maintained its B-/B rating for its banking sector. The outlook revision came through the views that bank deposits in Lebanon will grow substantially to support the government’s borrowing requirement and the country’s external financing requirement, despite the political turmoil across the region.
The rationale behind this decision followed several expectations and forecasts. As such, S&P anticipated that the Lebanese tourism and real estate sectors will remain on witnessing slow growths, due to the ongoing Syrian crisis; however, the agency expects bank deposits to increase by at least 4% in 2016. Moreover, S&P sees longer-term constraints on Lebanon’s economic growth, where it estimated growth in real GDP per capita to stand at negative 2.3% during 2010-2019, yet the current account deficit to be narrow due to the lower import bill from falling oil prices. Lastly, the organization believes that “inflation is expected to rise and net government debt to stabilize in 2017 at under 130% of GDP.”
Standard and Poor’s will consider raising the rating if “Lebanon’s policymaking framework became more predictable, supporting foreign capital inflows and improving the sustainability of public finances.”
Total Bank Deposits by June (in$M)
*total deposits include: resident private sector deposits, public sector deposits, non-resident private sector deposits, non-resident financial sector deposits