Moody’s upgrades outlook for Bahrain’s banking system

Moody’s upgrades outlook for Bahrain’s banking system

“We have changed banking outlooks in Gulf Cooperation Council states as the jump in oil prices is boosting economic activity and economies are recovering after the coronavirus shock,” said Nitish Bhojnagarwala, vice-president and senior credit officer at Moody’s.

“Non-oil activities including tourism will also contribute to the improvement in some areas.”

Moody’s expects Bahrain’s non-oil sector, where banks do most of their business, to expand by 3.2 per cent in 2022 and 2023 after bouncing back to 3.6pc in 2021 from a 5.9pc contraction in 2020 (0.4pc contraction in 2019).

Higher oil prices are easing government spending constraints and a new national economic growth plan will help revive the non-oil sector, it says.

Recovering business and consumer sentiment will support lending, while the easing of social distancing measures and travel restrictions – particularly the re-opening of the border with Saudi Arabia from where millions of tourists arrive on a yearly basis – will encourage a return to business as usual.

Off-budget spending on GCC-financed infrastructure projects will continue to provide business opportunities for banks.

Although the global fallout from Russia’s invasion of Ukraine is increasing uncertainty, the impact on Bahraini banks remains low at this stage given their limited direct exposure to both countries while any