S&P Revises Lebanon Outlook to Stable

Global credit ratings agency Standard and Poor's on Tuesday revised its outlook for Lebanon to stable from positive despite a deepening political crisis in the Mediterranean country.

"The stable outlook reflects our view that while the government's control over the economic and political agenda has been diminished, outbreaks of civil unrest in the country will be avoided," the agency said in a statement.

S&P also affirmed Lebanon's B/B sovereign credit ratings as well as the country's "4" recovery rating.

The statement comes after Shiite group Hizbullah last week forced the collapse of Saad Hariri's unity government in a long-running dispute over the U.N.-backed Special Tribunal for Lebanon (STL).

Central Bank governor Riad Salameh on Monday told Agence France Presse that Lebanon began to witness a decline in economic indicators in the end of 2010 as tensions over the STL deepened between Hariri's pro-Western alliance and an Iranian-backed camp led by Hizbullah.

The STL will reportedly indict Hizbullah members in connection with the 2005 assassination of Rafik Hariri, Saad's father.

S&P had already expected large fiscal and current account deficits for 2011, forecast at 7.5 percent and 19 percent of gross domestic product (GDP) respectively, prior to Lebanon's government collapse last Wednesday.

Despite a solid banking sector, Lebanon staggers under a public debt of more than 50 billion dollars (37.5 billion Euros), accumulated since the end of its 1975-1990 civil war.

Its debt-to-GDP ratio dropped from 180 percent in 2006 to 148 percent at the end of 2009.

S&P projected the debt-to-GDP ratio in 2011 at more than 120 percent, which remains among the highest in the world.

Leading ratings agency Moody's had estimated GDP growth would drop from between seven and eight percent in 2010 to five percent in 2011 prior to the collapse of Hariri's unity government.

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