POSITIVELY PERFECT: Bahrain gets S&P ratings boost on fiscal reforms, high oil prices
Bahrain has been upgraded to positive from stable by S&P Global Ratings which has affirmed its ‘B+/B’ long- and short-term foreign and local currency sovereign credit ratings.
The upgrade is on expectation that the government will continue implementing fiscal reforms to reduce the budget deficit that will place debt to GDP on a more sustainable path, stated the top rating agency.
In its review, S&P said Bahrain’s economy is benefiting from the surge in regional activity and elevated oil prices.
In the second-quarter of 2022, real GDP expanded 6.9 per cent year-on-year, the highest pace of quarterly growth since 2011, reflecting the sustained recovery of regional tourism, transportation and hospitality, amid higher oil prices.
“We expect the Bahraini economy will expand 4.8pc in 2022 before decelerating to about 2.5pc over 2023-2025 on the back of gradually declining commodity prices, slowing global growth, and tightening global financing conditions,” S&P said.
S&P Global Ratings pointed out that the positive outlook indicated that it expects the government to continue implementing fiscal reforms to reduce the budget deficit and benefit from additional support from other GCC sovereigns, if needed.
The positive outlook on Bahrain reflects the government’s ongoing implementation of the updated Fiscal Balance Programme (FBP) via expenditure cuts and revenue-enhancing initiatives, including the doubling of the value-added tax (VAT) rate to 10pc from 5pc on January 1, 2022.
Preliminary fiscal data point to a minor balanced-budget position underpinned by a 120pc increase in nominal tax revenue year-on-year, surpassing projected annual inflation of about 4pc, it added.
According to S&P Global, the Bahrain government remains committed to its multi-year economic recovery plan targeting more than $30 billion of strategic investments to boost non-oil growth.
“We expect the GCC will continue to extend political, economic and financial support to Bahrain, if needed. We note improvements in policymaking since the adoption of the FBP in late 2018,” the ratings agency stated.
