A Rating Agency Has Retained Lebanon’s Stable Economic Outlook

Lebanon Economy

Standard & Poor’s (S&P) has retained its B-/B long- and short-term sovereign credit ratings on Lebanon with a stable outlook.

Standard & Poor’s (S&P) has retained its B-/B long- and short-term sovereign credit ratings on Lebanon with a stable outlook.

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S&P’s confirmation of Lebanon’s ratings is at odds with Moody’s, which downgraded Lebanon’s long-term issuer ratings to B3 from B2 a couple of weeks ago.

S&P, whose ratings influence lenders’ attitudes towards sovereign and corporate borrowers, was seemingly encouraged by the high level of cash flowing into the country, largely driven by expatriate remittances.

“We anticipate that the general government debt burden will continue to rise from already high levels through 2021, but that deposit inflows will remain sufficient to support Lebanon’s large twin deficits over the next 12 months,” the ratings agency stated. “We are therefore affirming our “B-/B” long- and short-term sovereign credit ratings on Lebanon. The outlook remains stable.”

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Lebanon does, however, face big economic challenges, including high public debt and debt service payments, and doubts are often raised about its ability to protect its currency peg.

“We could lower our ratings on Lebanon if we saw the government was unable to access the international debt capital markets for an extended period, perhaps evidenced by further Banque du Liban financial engineering transactions,” S&P said.

“We could raise our ratings if Lebanon’s policymaking framework became more predictable and effective, boosting economic activity significantly more than our current forecasts, and improving the fiscal and external imbalances and the sustainability of public finances,” it added.

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