Bahrain gets S&P ratings boost on fiscal reforms, high oil prices

Bahrain gets S&P ratings boost on fiscal reforms, high oil prices

S&P Global Ratings today (November 26) revised its outlook on Bahrain to positive from stable, while affirming its 'B+/B' long- and short-term foreign and local currency sovereign credit ratings. The transfer and convertibility assessment on Bahrain remains 'BB-'.

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 tied to elevated oil prices.

In second-quarter 2022, real GDP expanded 6.9% year on year, the highest pace of quarterly growth since 2011, thus reflecting the sustained recovery of regional tourism, transportation, and hospitality amid higher oil prices.

Partially offsetting this was a 2.2% real contraction in the hydrocarbon sector year on year, owing to continued maintenance at the onshore Bahrain field.

Notwithstanding Bahrain's dependence on oil for its fiscal and external revenue, the contribution of hydrocarbons to GDP is much smaller at about 17%. This reflects a structural mismatch, which the government's FBP is attempting to correct by raising taxes from non-oil revenue, it stated.

"We expect the Bahraini economy will expand 4.8% in 2022 before decelerating to