S&P Global affirms rating, positive outlook on Bahrain

S&P Global Ratings has maintained Bahrain’s rating and maintained its outlook at positive as the kingdom continues to pursue reforms to boost non-oil revenue and the current account surplus looks set to rise.

The rating agency said the positive outlook is supported by continued financial sector stability and the potential for wider current account surpluses over the forecast horizon.

“We also expect the government will continue implementing fiscal reforms to reduce its budget deficit and benefit from additional support from other GCC sovereigns if needed,” S&P Global analysts Giulia Filocca and others wrote in the report.

S&P in November 2022 upgraded its outlook to positive from stable, citing the government’s commitment to reduce its budget deficit and benefits from higher oil prices.

Bahrain’s economy expanded by 4.9 per cent in 2022, its highest growth rate since 2013, and the agency projected that growth would decelerate to 2.8 per cent in 2023 due to a relative decline in commodity prices, slower global and regional growth and tightening financing conditions.

The International Monetary Fund applauded the government in Manama for its strong commitment to the economic reform agenda outlined in the country’s recovery plan and the revised fiscal balance programme.

Bahrain’s ‘B+/B’ long- and short-term foreign and local currency sovereign credit ratings could be raised over the next 12 months if the widening current account surpluses support a significant and sustained improvement in the country’s external position.

S&P said an improvement in the country’s budgetary position beyond expectation, contributing to a sustained reduction in net debt to GDP could also be supportive of the ratings.

Bahrain’s recovery plan

Meanwhile, Bahrain unveiled its strategic projects plan in October 2021 that seeks to catalyse over $30bn of investments and a regulatory reform package designed to support $2.5bn of foreign direct investment by 2023.

The country’s investment promotion agency, the Bahrain Economic Development Board (Bahrain EDB), attracted a record $1.1bn in direct investment in 2022. The investments from 88 companies are projected to generate over 6,300 jobs in the Gulf state over the next three years.

Bahrain’s economic recovery plan is aimed at bolstering domestic employment and attracting investments in strategic non-oil sectors including tourism, housing as well as transport and logistics and energy.

The projects include the building of five offshore cities, the country’s metro train and the expansion of Bapco’s oil refining capacity.

Bahrain secured a $10.2bn financial lifeline from its oil-rich GCC neighbours – the UAE, Saudi Arabia and Kuwait – in October 2018 to help cope with high debt levels and budget deficits, S&P said there remains potential for additional financial support beyond the program’s expiration at year-end 2024.

The Gulf state received $7.5bn between 2018 and 2022, including about $700m last year, with an additional $2.7bn to be disbursed between 2023 and 2024.

Read: Bahrain unveils new ‘golden licence’ to attract investors