Moody’s Affirms Lebanon’s “C” Rating Amid Deep Crisis, Fragile Reform Prospects

A woman takes a photo near an “I Love Beirut” sign in downtown Beirut, Lebanon (Reuters)
A woman takes a photo near an “I Love Beirut” sign in downtown Beirut, Lebanon (Reuters)
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Moody’s Affirms Lebanon’s “C” Rating Amid Deep Crisis, Fragile Reform Prospects

A woman takes a photo near an “I Love Beirut” sign in downtown Beirut, Lebanon (Reuters)
A woman takes a photo near an “I Love Beirut” sign in downtown Beirut, Lebanon (Reuters)

Moody’s Investors Service has reaffirmed Lebanon’s sovereign credit rating at “C,” underscoring the country’s entrenched economic, financial, and social crisis that has persisted since 2020.

The rating reflects the agency’s expectation that losses for holders of Lebanese sovereign bonds could exceed 65%.

Lebanon has been mired in a financial collapse since 2019, which intensified following the government’s default on its sovereign debt in March 2020. This unraveling led to the dramatic devaluation of the national currency, hyperinflation, and a sharp deterioration in public services.

Despite numerous reform pledges, the country has remained locked in a downward spiral, deeply affecting the livelihoods of its citizens and the health of its economy.

In its latest report, Moody’s noted that the newly appointed government under Prime Minister Nawaf Salam, who assumed office on February 8, 2025, has started to address some of these longstanding challenges.

Nevertheless, Lebanon continues to face major structural hurdles, particularly the need for comprehensive restructuring of government debt, the central bank, and the commercial banking sector. Securing international financial support from the International Monetary Fund and other global partners hinges on the successful implementation of these reforms.

Moody’s acknowledged some recent positive steps. These include amendments to the banking secrecy law approved by Parliament on April 24, 2025, allowing regulators access to banking records for up to ten years.

Furthermore, the Cabinet approved a draft law on April 12, 2025, aimed at restructuring the banking sector while prioritizing the protection of small depositors. These measures are viewed as critical for unlocking external assistance.

However, the core challenge remains unresolved: how to distribute the estimated $70 billion in financial system losses among stakeholders, including the government, central bank, commercial banks, and depositors. Previous reform attempts have stumbled over this politically and socially sensitive issue, highlighting the difficulty in forging a unified national response.

Following a staggering 25% contraction in real GDP in 2020, Lebanon experienced a brief phase of relative stability before the economy shrank again by 7.5% in 2024 due to intensifying conflict on Lebanese territory.

Moody’s forecasts a modest economic rebound in 2025, with growth projected at 2.5%, potentially rising to 3.5% in 2026, assuming an agreement on reform is reached.

The rating agency noted that Lebanon’s economic strength is severely weakened by the collapse of its pre-crisis economic model, which depended heavily on foreign capital inflows. Institutional and governance quality remain among the weakest globally, despite recent reform efforts.

Lebanon’s fiscal position is deeply strained, reinforcing Moody’s outlook for significant creditor losses once debt restructuring is undertaken. Additionally, the country faces elevated risks related to political instability, fiscal liquidity, banking sector fragility, and external vulnerabilities, all of which are unlikely to improve before the restructuring process is complete.

Moody’s does not expect Lebanon’s rating to improve in the near term given the scale of its unresolved challenges.

Any future upgrade will depend on the pace of fiscal and institutional reforms, the government’s ability to generate sustainable revenue, and the economy’s successful shift to a more resilient growth model. Long-term debt sustainability will also require the ability to produce and maintain large primary fiscal surpluses.



4 Factors Behind the Decline of Saudi Stock Market in H1 2025

Two investors monitor the trading screen in the Saudi financial market in Riyadh (AFP) 
Two investors monitor the trading screen in the Saudi financial market in Riyadh (AFP) 
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4 Factors Behind the Decline of Saudi Stock Market in H1 2025

Two investors monitor the trading screen in the Saudi financial market in Riyadh (AFP) 
Two investors monitor the trading screen in the Saudi financial market in Riyadh (AFP) 

Financial analysts and market specialists have identified four main factors driving the decline of the Saudi stock market during the first half of 2025. Speaking to Asharq Al-Awsat, they pointed to heightened geopolitical tensions in the region, ongoing trade disputes and tariffs between the United States, China, and Europe, oil price volatility, and persistently high interest rates. Collectively, these pressures have squeezed liquidity and weighed heavily on market performance.

Despite the downturn, analysts expect the market to gradually recover over the second half of the year, supported by potential global interest rate cuts, stabilizing oil prices, easing economic uncertainty, and forecasts of robust growth in Saudi Arabia’s GDP and the non-oil sector, alongside continued government spending on major projects.

The Saudi stock market recorded notable losses in the first six months of 2025, with the benchmark index retreating 7.25%, shedding 872 points to close at 11,163, compared to 12,036 at the end of 2024. Market capitalization plunged by around $266 billion (SAR 1.07 trillion), bringing the total value of listed shares to SAR 9.1 trillion.

Seventeen sectors posted declines during this period, led by utilities, which plummeted nearly 32%. The energy sector fell 13%, and basic materials dropped 8%. In contrast, telecom stocks advanced around 7%, while the banking sector eked out a marginal 0.05% gain.

Dr. Suleiman Al-Humaid Al-Khalidi, a financial analyst and member of the Saudi Economic Association, described the first-half performance as marked by significant swings. “The index rose to 12,500 points, only to lose nearly 2,000 points before recovering to about 11,260,” he said.

He attributed the volatility to several factors: regional geopolitical strains, oil prices dipping to $56 a barrel, and high interest rates, which constrained liquidity. He noted that financing costs for traders now range between 7.5% and 9%, historically elevated levels.

“The Saudi market posted the steepest decline among regional exchanges despite record banking sector profits, which failed to translate into stronger overall index performance,” he observed.

Looking ahead, Al-Khalidi anticipates three interest rate cuts totaling 0.75 percentage points by next year, which would bring rates down to about 3.75%. “That should encourage a recovery in trading activity, improve liquidity, and support an upward trend in the index toward 12,000 points, potentially reaching 13,500 if momentum builds,” he added.

Meanwhile, Mohamed Hamdy Omar, economic analyst and CEO of G-World, described the downturn as largely expected, citing external pressures and prolonged trade tensions between the US, China, and Europe. “Retaliatory tariffs dampened investor confidence globally, and Saudi Arabia was no exception,” he said.

Lower oil revenues also strained state finances, leading to a budget deficit of SAR 58.7 billion in the first quarter, further tightening liquidity. Trading volumes fell over 30% year-on-year.

Omar pointed out that changes to land tax regulations and heightened regional security risks also weighed on sentiment. Nonetheless, he expects gradual improvement in the second half of 2025, driven by anticipated rate cuts, rebounding oil prices, and continued large-scale public investments.

He stressed the need for vigilance: “Saudi Arabia remains among the most stable markets, thanks to proactive regulation and policies designed to attract foreign capital and bolster investor confidence.”