Manama: Standard & Poor’s Ratings Services yesterday affirmed its long- and short-term foreign and local currency sovereign credit ratings on Bahrain at ‘BBB-/A-3’.
It also affirmed its long- and short-term foreign and local currency issuer credit ratings on the Central Bank of Bahrain at ‘BBB-/A-3’.
“Since our last review on June 12, 2015, we perceive that the government has stiffened its resolve to address the significant widening of the fiscal deficit,” S&P said.
“It has enacted (or will soon enact) measures to unify gas prices and to reduce subsidies for electricity and meat.
“However, the exact fiscal savings resulting from these consolidation measures remain to be seen, although they could be as much as 2.5 per cent of gross domestic product (GDP) in 2016.
“We also expect revenue collection to be boosted by higher-than-expected real GDP growth in non-oil sectors over the first half of 2015, although we note that quarterly growth statistics have been volatile,” it said.
“Over the medium term, we believe that Bahrain’s public finances will benefit from nascent plans to introduce value-added tax and raise excise taxes, although we have not yet factored these measures into our forecasts.
Notwithstanding these measures, our fiscal projections have worsened since the last review, on account of our lower oil price forecasts,” it added.
“Although Bahrain’s fiscal profile has weakened, its economic performance has been better than we expected over the first three quarters of 2015, which has led us to slightly increase our GDP growth forecast for the year to 2.5pc, the agency said.
“Preliminary data point to strong non-oil growth in manufacturing, construction, and transportation.
“We still expect growth to average about 2.6pc over 2015-2018.
“This reflects Bahrain’s relatively diversified economy, proximity to the large market of Saudi Arabia, its strong regulatory oversight of the financial sector, a relatively well-educated workforce, and its low-cost environment,” it said.
“These still provide incentives for investment and create potential for the growth of the non-oil economy, which represents approximately 80prc of total GDP.
“Population growth has continued (averaging 3pc over 2012-2014), as has employment growth,” it added.
The outlook on both Bahrain and its central bank remains negative, the agency said.
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