Fitch degrades the note of Lebanon to “B-” – L’Orient-Le Jour

Fitch Ratings downgraded last week Default Rating transmitter long Lebanon “B” to “B-” for sovereign debt issued in foreign currency and in Lebanese pounds. The agency raised its outlook parallel to “negative” to “stable”. Other Lebanon issuer default ratings were also revised to “B-”, except that of short-term foreign currency maintained at ‘B’.
“Fitch eventually align its rating on the the American agency Standard & amp; Poor’s (S & amp; P), which had downgraded Lebanon to “B” to “B-” in November 2013 “, commented to L’Orient-Le Jour director of the research department of the Byblos Bank Group, Nassib Ghobril. Moody’s had downgraded its side note from Lebanon to “B1″ to “B2″ in December 2014.

Public Finance No improvement Fitch assigns in
first this decrease the risks associated with a deterioration in the political and security situation at local level, a phenomenon exacerbated by the ongoing conflict in Syria. The agency, which cites the 26 months of presidential vacancy, political paralysis in Parliament and the government, and the deterioration of public services as the main signals of the crisis, believes that the improvement of the situation is conditioned by a lull in Syria. “Lebanon would resist better to regional crises if public finances were sound,” says Ghobril.
A by Fitch shared analysis that found “no improvement” at this level and recalls that the Lebanese debt, estimated 136.7% of GDP in 2015, is the third highest among the sovereign debt it evaluates. “Each year, the public deficit widening further debt,” says Mr Ghobril. After reaching $ 3.95 billion in 2015 (+ 28.6%), the public deficit and ended the first quarter to $ 1.44 billion (35.7% compared to the same period in 2015) .
a trend that is not expected to reverse by 2018 without tax reform and lower public spending, says the rating agency also notes that the debt service absorbed 42% State revenue between 2013 and 2015. while Fitch recognizes that the level of deposits in Lebanese banks is sufficient (151.6 billion dollars in 2015, up 5%) to fund the government while continuing to grant private sector loans, however, the agency sees slowing growth indicate a “growing pressure” on the country’s creditworthiness. “The situation became alarming if a deposit flight,” said Marwan Barakat, head of the economic research department of Bank Audi.
The third factor of concern isolated by the rating agency further concerns performance of the Lebanese economy, whose growth is expected to be below 2%, according to Fitch, despite crude prices falling (currently between 40 and 50 dollars per barrel).
Despite these handicaps, the agency believes that Lebanon can count on a high level of liquidity, despite a deficit in the current account, which amounted to 17% of GDP in 2015, large foreign exchange reserves, or the rigor with which the government keeps track of repayments of public debt, not to fear an immediate degradation. “It’s a cool without warning to Lebanon,” says Barakat, adding that the downgrade of Lebanon by the agency will have no immediate impact on the management of public debt.