NEW YORK: Fitch Ratings Thursday revised down the sovereign foreign currency long-term credit rating for Lebanon to negative from stable, citing increased political risks, deteriorating public debt dynamics and weak economic growth prospects.
The credit rating was affirmed at B, five notches below investment grade, Fitch said in a statement.
“The involvement of Hezbollah and Sunni groups in the neighboring Syrian conflict has increased sectarian tensions domestically,” Fitch said, referring to the civil war in Syria in which an estimated 100,000 people have died and millions more have been forced from their homes.
Standard & Poor’s rates Lebanon B-minus with a negative outlook, one notch below Fitch. Moody’s Investors Service has the nation one notch above Fitch at B1 with a negative outlook.
The flood of refugees into Lebanon increases strains on the economy, the firm said.
There is also political uncertainty ahead of a presidential election next year, Fitch said.
The firm highlighted a deteriorating ratio of public debt as a part of gross domestic product. It expects an already high figure of 138 percent to increase to above 140 by the end of 2015.
Public debt sustainability remains reliant on the big role domestic banks play in deficit financing. The banking system’s large deposit base and expectations it will continue to grow underpins this sustainability assumption.
“Loss in confidence induced by spill-overs from the Syrian conflict has taken a heavy toll on economic performance,” Fitch said, adding that it expects GDP growth of 1.5 percent this year.
“No major improvement is to be expected until the Syrian conflict is resolved,” Fitch said.