S&P holds on to ‘negative outlook’

Wealthy Syrian refugees
a one-off growth booster

Standard & Poor's Ratings Services (S&P) maintained a negative outlook on Lebanon’s sovereign credit ratings and affirmed the long- and short-term foreign and local currency sovereign credit ratings at 'B/B'. S&P attributed its ratings to risks linked to domestic political instability and low potential for economic improvement in light of the Syrian conflict.

The ratings are constrained by a divisive political environment and a high public debt burden which increased in 2012 after a previous five-year decrease. S&P expected a general public deficit of about eight percent of GDP in 2013.

The ratings are supported by a large and stable depositor base: “Despite the Syrian civil war, domestic security and policy formation have not substantially deteriorated in Lebanon over the past year and bank deposits have continued to grow, which has financed the sovereign's borrowing needs.” According to S&P the speed with which a new prime minister was named will help defuse political tensions in the near term.

S&P said the economy may have benefited from an increase in domestic demand growth due to the influx of middle- and upper-class Syrian refugees. However, it said these were one-off boosts to growth that are not expected to be repeated in 2013.

Growth this year could benefit from increased transfers to municipalities and the planned salary scale adjustment, said S&P, but, it predicted that the public salary scale will not be implemented.