Fitch affirms country's stable outlook & 'BB' rating

High per capita income, credibility of exchange rate system support creditworthiness

Fitch Ratings has affirmed the sovereign rating at ‘BB’ with a stable outlook. High per capita income, liberal business environment, and the credibility of the exchange rate system support the sovereign's creditworthiness, the agency said.

Fitch kept the Long-term foreign and local currency Issuer Default Rating (IDR) and Short-term foreign currency IDR at 'B', and affirmed the Country Ceiling at 'B'. The Outlook is Stable. It said that large foreign exchange reserves, lower debt levels, and reduced interest costs “mitigate the downside risks to political stability, growth, and public finances in 2012.” The rating was made assuming a stable public debt ratio.

The rating is threatened by a rise in debt, or a sustained capital outflow. The debt to GDP ratio is expected to stabilise at 135 percent of GDP in 2012, and over the next two years.
“The risk of sustained deposit flight prompted by political instability is the primary risk to Lebanon's rating. Currently, there are no signs of this.” Non-resident deposits posted a growth of 15 percent in 2011. The rate was maintained in the first four months of this year. Total banking system deposits grew by eight percent until April.

Official estimates suggest GDP rose by a faster than expected five percent in 2011. Growth is expected to slow further this year, mainly induced by a slowdown in tourism.