S&P affirms Bahrain’s credit ratings with positive outlook

S&P Global Ratings yesterday affirmed Bahrain’s long- and short-term foreign and local currency sovereign credit ratings at “B+/B” with a positive outlook. The transfer and convertibility assessment on Bahrain also remains at “BB-”.

The ratings agency cited the country’s strong economic recovery, fiscal consolidation efforts and continued support from GCC members as reasons for the affirmation.

It also noted that the kingdom’s external position has improved, with current account surpluses expected to continue in the coming years.

Overall, S&P believes that Bahrain’s credit ratings are supported by the country’s strong economic fundamentals and continued support from GCC members.

As rationale for the rating affirmation, it said the government remains largely committed to its multi-year economic recovery plan targeting more than $30 billion of strategic investments to boost non-oil growth over the medium term, spurring domestic employment and attracting investments in strategic sectors such as tourism, housing, roads, airports and electricity.

Associated projects include the building of five offshore cities, the development of the Bahrain Metro, and the Bapco refinery modernisation project.

As for the availability of financing for these projects, S&P believes the GCC will likely continue to extend political, economic and financial support to Bahrain, albeit increasingly in the form of investments over direct government support.

“In our view, the government’s willingness and ability to pursue budgetary reforms under the Fiscal Balance Programme (FBP) has strengthened fiscal policymaking in recent years,” the agency added.

The analysis further notes that Bahrain has a diverse economy that benefits from its proximity to Saudi Arabia, strong financial sector regulation, a well-educated workforce and a low-cost environment.

In 2022, Bahrain’s real GDP grew by 4.9 per cent, its highest growth rate since 2013. This growth was driven by a rebound in regional tourism, transportation and hospitality, as well as higher oil prices. The recovery was also bolstered by growth in the manufacturing sector, led by increases in aluminium production at Alba.

On the external front, the kingdom posted a record current account surplus of 15.4pc of GDP in 2022, bolstered by high oil prices and a boost in aluminium production (comprising 40pc and 20pc of total merchandise exports, respectively).

Bahrain’s net asset position could improve further should the government continue to develop its non-oil sector and oil prices and global demand remain sufficiently buoyant, suggests S&P.

“We expect Bahrain will receive full disbursements under a $10.2 billion GCC support package, and there remains potential for additional financial support beyond the programme’s expiration at year-end 2024.”

Outlining the upside scenario, S&P said it could raise the kingdom’s 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 our 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,” the agency explained.


Source :https://www.gdnonline.com/Details/1242965


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