S&P Global Ratings have affirmed its ‘B+/B’ long- and short-term foreign and local currency sovereign credit ratings on Bahrain. The outlook remains positive. The transfer and convertibility assessment on Bahrain also remains ‘BB-‘.
The positive outlook is supported by continued financial sector stability and the potential for wider current account surpluses over the forecast horizon. The agency also expected the government will continue implementing fiscal reforms to reduce its budget deficit and benefit from additional support from other Gulf Cooperation Council (GCC) sovereigns, if needed.
Upside scenario
Additionally, S&P noted it could raise the ratings over the next 12 months if widening current account surpluses support a significant and sustained improvement in Bahrain’s external position. An improvement in the government’s budgetary position beyond the agency’s expectations, contributing to a sustained reduction in net debt to GDP could also be supportive of the ratings. Further support for an upgrade could come from a significant acceleration in productivity-led per capita economic growth.
Read more: Bahrain’s money supply up 7.91% in March
Downside scenario
Moreover, S&P said it could revise the outlook to stable if the government’s net debt and debt-servicing burden increase beyond our current assumptions, notwithstanding fiscal consolidation measures. Also, the agency could also revise the outlook to stable if foreign currency reserves decline sharply, limiting the government’s ability to service its external debt and weighing on monetary policy effectiveness.
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