The research published by Moody’s investors’ service on Thursday March 21, 2019 maintained a stable outlook for Lebanese banks on expectations of improved economic growth, and higher deposit inflows in the upcoming period. This was reflected in their forecast of 1.3 per cent GDP growth in 2019 and 1.5 per cent in 2020.
Moody’s highlighted the fact that any negative political development that may occur is a key risk that will eventually affect the pace of economic reform and depositor confidence and therefore the situation of Lebanese banks.
Moody’s also raised expectations about a 16% annual growth in deposit inflows from $5.6B in 2018 to about $6.5B in 2019, sufficient to allow banks to finance the government and the economy. According to Moody’s, this growth comes as a result of the formation of the Lebanese government in January that lifted up confidence after months of investor and depositor uncertainty.
Moody’s concentrated on the role of the new formed government in achieving long- term fiscal sustainability and rebuilding customer’s confidence. Also, they stated that large banks will seek to mitigate their risk factors through cost control supported by digitalization, and growth abroad.
The rating agency forecasted the fiscal deficit to narrow to 9.5% of GDP in 2019 and 9% by 2020, but to remain large, with the government relying on local banks to finance the gap.
Key macroeconomic trends in Lebanon
Source: Moody’s Investors Service