Fitch Downgrades Lebanon's Rating over Political Woes

Fitch, the rating agency, downgraded Lebanon's long-term foreign and local currency issuer default rating (IDRs) to negative, citing political uncertainties, spill-overs from the Syrian conflict on economic performance and slow growth prospects.

The report said that Lebanon's outlook was downgraded to negative from stable.

Fitch said that the country's long-term foreign and local currency Issuer Default Ratings (IDRs) have been affirmed at 'B', the issue ratings on Lebanon's senior unsecured foreign and local currency bonds are also affirmed at 'B', the Country Ceiling is affirmed at 'B' and the Short-term foreign currency IDR at 'B'.

The ratings agency said that “the involvement of Hizbullah and Sunni groups in the neighboring Syrian conflict has increased sectarian tensions domestically. Violence in Lebanon, though still sporadic, has intensified in recent months,” had an impact on Lebanon's economy, in reference to the conflict in Syria, which erupted in March 2011.

The firm also said that the “ever-rising number of refugees” is adding tension and strains on the country's economy, especially on infrastructure and public institutions.

It said that the absence of agreement on the formation of a new government, Lebanon's political life has been paralyzed since March 2013 and presidential elections in 2014 add to political uncertainty.

Fitch expected that the public debt-to-GDP ration to rise to 138% at end of 2013 and above 140% by the end of 2015.

“No major improvement is to be expected until the Syrian conflict is resolved,” the firm added.

Ratings agency Standard and Poor's lowered in November of the ratings on Lebanon to 'B-' over the “deteriorating fundamentals and rising political risks, adding that the outlook remains negative.”

S&P also lowered to 'B-' from 'B' its long-term counterparty credit ratings on three Lebanese banks, Bank Audi SAL–Audi Saradar Group, BankMed s.a.l., and Blom Bank sal.

The outlooks on all three banks remain negative, the agency said.