S&P raises Lebanon outlook to stable

Standard & Poor's raised its outlook for Lebanon to stable on Friday, citing the country' stable financial system and steady deposit inflows, but reaffirmed its B-/B long- and short-term foreign and local currency sovereign credit ratings.

The announcement comes after Lebanese 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 has 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 which 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.