Standard & Poor’s raised its sovereign credit outlook on Bahrain to stable from negative on Monday, citing stable economic growth as well as a stabilizing political environment.
The ratings agency affirmed the Gulf nation’s low investment grade credit rating of BBB.
“Our ratings on Bahrain are supported by the country’s strong external and fiscal positions, both of which are underpinned by hydrocarbon resources,” S&P said in a statement.
“The ratings are constrained by our view of continuing domestic political tensions and the fiscal dependency on sustained high oil prices and international donor support,” the firm said.
Bahrain is rated BBB with a stable outlook by Fitch Ratings while Moody’s Investors Service has the nation’s credit rating one notch higher at Baa1, although the outlook is negative.
The island state, which serves as the base for the U.S. Navy’s Fifth Fleet, has been in turmoil since protests erupted in 2011. Shi’ite Muslims have demanded an end to the Sunni-led monarchy’s political domination and full powers for parliament.
Last week, Bahrain asked pro-democracy opposition parties to nominate delegates for talks to try to break nearly two years of political deadlock in the Gulf Arab state.
S&P said Bahrain’s rating was also constrained by stagnating real gross domestic product per capital growth, which the firm is forecasting will be about one per cent in 2013-2015.
“This is low compared to peers at similar wealth levels,” S&P said.
“Though Bahrain’s 2011 political crisis weakened growth potential and damaged the country’s reputation as a business services hub, we believe a post-crisis status quo has been established,” S&P said.