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Moody's lowers Lebanon's rating outlook to negative

Moody's revised down its outlook on Lebanon's issuer ratings to negative from stable, saying domestic and geopolitical risks threaten the country's financial stability and government liquidity position.

With Lebanon yet to form a government since the May parliamentary elections, Moody's said heightened tensions and the absence of fiscal consolidation policies continue to jeopardize capital inflows to the country and disbursements pledged by international donors.

"[L]ebanon's fiscal metrics that have already been among the weakest of all the sovereigns rated by Moody's would weaken further, contributing to yet higher liquidity and financial stability risks," said the debt watcher, which affirmed the country's issuer ratings at B3.

Without a government to alleviate fiscal imbalances, Lebanon's budget deficit is projected to hit 10.5% of GDP in 2018, Moody's said, up from its previous forecast of 8.9%. The deficit is expected to narrow to 9.5% and 9.0% in 2019 and 2020, respectively.

Lebanon's government debt burden is forecast to keep rising to over 150% of GDP by 2021 from an estimated 141% in 2018, according to Moody's.

In affirming the country's ratings, Moody's said it assumes that Lebanon will form a government in the near term and implement fiscal consolidation measures that would unlock international donor commitments. Those commitments would support GDP growth and ease liquidity risks.