Ratings agency upgrade Bahrain outlook

Ratings agency Standard and Poor's has uprated the outlook on Bahrain's economy from 'negative' to 'stable', as the economy stabilises, helped by a buoyant hydrocarbon industry.

Standard & Poor’s Ratings Services has revised its outlook on Bahrain to stable from negative, while the country’s sovereign credit rating remained unchanged at (‘BBB/A-2’).

In revising its outlook, the credit rating agency recognised that Bahrain has emerged from the 2011 crisis with a restrained but stable economy [2], primarily driven by a buoyant hydrocarbon sector and higher public spending.

In fact, the outlook on the Kingdom reflects S&P’s view of Bahrain’s stable growth [3], well regulated financial system, and manageable asset quality risks amongst other factors.

Welcoming the revision, the Central Bank of Bahrain (CBB) Governor Rasheed Al Maraj said: “The revision is not only recognition of Bahrain’s sound economic [4] management and financial stability but also a vote of confidence in the Kingdom’s economic reform programme, and ability to withstand different shocks.”

“Our ambition to be a dynamic, competitive, well-diversified economy for the post-oil era continues, and encouraging the growth and diversification of the financial sector is a major pillar in that strategy,” said Mr. Al Maraj.

Assuming an average oil price of $111/barrel, S&P has forecast deficits of roughly 2pc of GDP for 2013-2015.

GCC development funds of about $1 billion annually over 10 years are expected to begin having an effect in 2013, the ratings agency further said.

“This non-debt financing should reduce Bahrain’s need to borrow to meet its capital expenditure needs and as a result, the general government debt burden is unlikely to increase significantly from current levels.”

According to S&P, large-scale public investment and greater hydrocarbon production should support growth prospects in the Kingdom.

On raising the ratings, the agency said that would happen if a credible political process emerged and a renewed social contract appeared likely. In addition, if the boost in public investment improved Bahrain’s growth [5] prospects beyond expectations, the ratings could be raised.

GCC development funds of about $1 billion annually over 10 years are expected to begin having an effect in 2013