Lebanon’s Government Bond Ratings Asserted B-/B with a Stable Outlook

Credit rating agency Standard & Poor’s (S&P) asserted Lebanon’s government bond rating at B-/B for long- and short-term foreign and local currency bonds, with a stable outlook, on the 27^th of March 2015.  In spite of the continued internal and external political instabilities, deposit flows into Lebanon’s banking sector are expected to remain robust and support the economy’s ability to meet financing needs, as mentioned in the S&P report. Resident and non-resident deposits grew by 6% in 2014, and are forecasted to increase by a similar percentage in 2015. This should be enough for the domestic financial sector to finance the large government deficit.

Moreover, the report outlined that lower oil prices are believed to have a positive effect on Lebanon’s economy, since they result in lower costs of imports and lower fiscal expenditures. However, the net benefits from lower oil prices could be partially offset by ongoing conflicts in Syria as well as the internal political environment.

Standard & Poor’s forecasted a small acceleration in real GDP growth to over 2% in 2015, compared to an estimate of 1.5% in 2014, assuming relatively stable political environment with neither a significant development in the political stalemate nor a substantial worsening in the security environment.

S&P would consider raising the ratings if public finances become stronger or if domestic policymaking improve and translates into fiscal reforms. However, the ratings could be lowered if public finances deteriorate significantly or if political and economic situation worsen and impair deposit growth.

Standard & Poor’s Ratings for Lebanon

Source: Standard & Poor’s