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Stable outlook
S&P affirms its ‘B/B’ rating on Lebanon’s sovereigns
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Rating agency Standard & Poor's Ratings Services (S&P) affirmed its 'B' long-term and 'B' short-term foreign- and local-currency sovereign credit ratings on the Lebanon. The outlook is stable.

“The stable outlook balances our view of Lebanon's political risks, high level of government debt, and extensive dollarization against its level of economic development and international reserves,” the firm said in a report published on January 31.

The report said that continuous internal and external political challenges, constrain growth, hinder fiscal consolidation, and increase the country's vulnerability to a balance of payments crisis. It said that the country's large, stable, and growing resident and nonresident depositor base accommodates the government's financing needs.

It said that the country has maintained a greater degree of stability than a number of its neighbors in the MENA region. However, the report said, unlike previous crises in recent years, which had a positive effect on the Lebanese economy, the growing instability in Syria, and the uncertainty caused by the extended political transition during the first half of 2011, have depressed investment.

S&P estimated that GDP growth reached 1.5 percent in 2011, after an average of 8.2 percent between 2007 and 2010. The firm expected that the turmoil in Syria will continue to constrain Lebanese consumer and investment sentiment in the near term, but that the Lebanese government will not collapse.

S&P said that it could raise the ratings if the government demonstrates significant progress on fiscal reform, raising the primary surplus and thus accelerating the government debt-to-GDP ratio's declining trend. It said that ratings could also be raised if there were an improvement in domestic stability and government cohesion, and if the government established a track record of structural reforms and infrastructure investment.
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Date Posted: Feb 01, 2012