BEIRUT: Standard & Poor’s raised its outlook for Lebanon to stable Friday, citing the country’ steady financial system and deposit inflows, but reaffirmed its B-/B long- and short-term foreign and local currency sovereign credit ratings.
The announcement comes after politicians ended a year of deadlock in March and agreed on the formation of a new government led by Prime Minister Tammam Salam.
Political impasse coupled with increasing violence linked to the civil war in neighboring Syria have sharply cut Lebanon’s economic growth in the last three years and increased public debt to 140 percent of GDP.
But S&P said the government’s debt servicing capacity was supported by stable deposit flows that had remained stable despite the domestic and regional turmoil.
“This funding source has helped stabilize the government’s financing needs during increasingly challenging times for the internal and external political environments,” it said.
“On the other hand, we see little prospect for significant improvement in macroeconomic fundamentals or public finances, and we believe security risks will continue to weigh heavily on stability and growth.”
Lebanon’s Finance Minister Ali Hassan Khalil welcomed the revised outlook as a “positive indicator” for Lebanon.
“The government intends to carry out a package of measures to promote confidence and maintain progress,” he told Reuters.
A version of this article appeared in the print edition of The Daily Star on April 12, 2014, on page 4.