Moody’s and S&P 2018: Lebanon’s Economic Risks “Extremely High”

In the past two weeks of January 2018, S&P and Moody’s have renewed their respective assessments and warnings on Lebanon’s economy.

In details, Moody’s lowered on January 22nd its Macro Profile for Lebanon’s banking system to “Very Weak +” from “Weak –“, to reflect the increased political risk and a weaker institutional strength. However, the agency affirmed the B3 long-term deposit ratings and the b3 standalone baseline credit assessments (BCAs) of both: BLOM Bank and Byblos Bank, which basically reflects the limited impact of Lebanon’s deteriorated Macro Profile on these banks’ financial profiles.

As for S&P Global Ratings, it maintained Lebanon’s Banking Industry Country Risk Assessment at “group 8,” and classified the banking sector of Lebanon (B-/Stable/B) in “group 9” under its Banking Industry Country Risk Assessment (BICRA), which assigns scores to banking systems on a scale from 1 to 10, with “group 1” including the least-risky banking sectors. Nonetheless, the report explains that Lebanese banks can withstand the deteriorating quality of private-sector loans. The agency also notes that, “the trend for economic risk in Lebanon is stable”.

Overall though, S&P and Moody’s both did not foresee further economic deterioration in Lebanon’s economy in 2018; yet, they reiterated the dangers of the Lebanese banks’ high exposure to the government and how the continued political bickering is the main hurdle to any reforms.

Source: S&P, Moody’s

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