- Standard & Poors revises outlook for three major Lebanese banks to negative
- This is due to negative outlook for Lebanese government
- Political vacuum in Lebanon as well as regional instability are weighing on economic growth
It has maintained their B- long-term credit ratings.
The revision comes a week after S&P changed the outlook for the Lebanese government to negative, while affirming the B-/B rating. This was due to the effect of political uncertainty and regional tensions on economic growth.
Lebanons parliament has failed to select a president, and the leadership vacuum has hampered political decision-making since May 2014. Parliament has delayed legislative elections from 2013 to 2017, and has not passed a budget since 2005. Lebanon has also been unable to carry out reforms and much-needed infrastructure investments.
At least 1.2 million refugees are also weighing on public finances.
S&P predicts a government deficit of 10 per cent of GDP for 2015, and net government debt to increase to 127 per cent of GDP by 2018.
Despite good diversification and crisis management strategies by the three banks, they are highly exposed to the domestic economy and government debt.
Lebanons banking sector has weathered the difficult conditions well, thanks to its reliance on private capital inflows from Lebanese expatriates. But the remittances are expected to contract by 6.6 per cent in 2015 to $6.7bn in 2015, from $7.1 in 2014, according to a report published by the Washington-based Institute of International Finance.