Fitch downgrades Lebanon’s outlook to negative, affirms B ratings

By bne IntelliNews December 23, 2013

Fitch revised Lebanon's outlook to negative from stable on heightened political risk but affirmed its long-term foreign and local currency Issuer Default Ratings (IDRs) at B. The issue ratings on Lebanon's senior unsecured foreign and local currency bonds were also affirmed at B. The country ceiling was likewise affirmed at B and the short-term foreign currency IDR at B.

Fitch underscored Lebanon’s heightened political risk arguing that “the involvement of Hezbollah and Sunni groups in the neighbouring Syrian conflict has increased sectarian tensions domestically.” Violence in Lebanon, albeit still sporadic, has intensified in recent months, Fitch said.

The surging number of Syrian refugees is also boosting tensions and strains, especially on infrastructure and public institutions, according to Fitch. Given the lack of political consensus on the composition of a new government, political life in Lebanon has been paralysed since March 2013, and the planned presidential elections in 2014 also increase political uncertainty, Fitch noted.

Fitch likewise warned about Lebanon’s deteriorating public debt dynamics. Following several years of retreat, the public debt-to-GDP ratio is reportedly rising again. The ratio will increase to 138% of GDP at end-2013 from 134.2% the year before and will hit 140% by end-2015, Fitch forecasts. The agency underscored the role of domestic banks in deficit financing through the intermediation of their large deposit base. But the deposits growth has slowed since the start of the Syrian conflict and worsening security in Lebanon exposes the banking sector to a heightened risk of sudden deposit outflows, Fitch warned.

Another factor weighing on Lebanon’s outlook is weak growth prospect amid the spill-overs from the Syrian conflict, according to Fitch. Real GDP growth will reach 1.5% in 2013 and no major improvement is to be expected until the Syrian conflict is resolved, Fitch said.

Fitch assumes that security in Lebanon will worsen further in coming months, but violence will fall short of escalating into a full-scale civil conflict. Fitch also assumes that international oil prices will be lower in 2014 and 2015 than in 2012 and 2013. The trend will help limit the deterioration of the current account deficit and budget transfers to the state electricity company EDL, Fitch said.

Related Articles

Turkish Airlines' share price falls further after UK follows US with electronics flight ban

The share price of Turkish Airlines (THY) was down 2.88% by the end of trading on March 21 after the UK joined the US in banning electronic devices larger than smartphones in hand luggage on flights ... more

Turkish Airlines' share price slides after US bans electronic devices on flights

Flag carrier Turkish Airlines (THY) saw its share price fall 1.69% on March 21 after confirming it is among the nine airlines affected by a US cabin baggage ban on large electronic devices on flights ... more

Iran, Syria sign raft of memoranda and deals

Following the purge of foreign-backed rebels in the devastated Syrian city of Aleppo by Iranian, Lebanese and Russian forces, Damascus’s prime minister Imad Khamis was in Tehran to sign five ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss