Standard & Poor’s Ratings Services on Wednesday affirmed its long- and short-term local and foreign currency sovereign credit ratings on the Kingdom of Bahrain at ‘BBB/A-3’.
S&P also removed from CreditWatch Negative the ratings on the Central Bank of Bahrain and Bahrain Mumtalakat Holding Company the sovereign wealth fund. The outlook on both is negative.
The ratings were removed from CreditWatch with negative implications, where they were placed on March 18, 2011. The ratings were initially placed on CreditWatch with negative implications on Feb. 21, 2011, when the ratings on the sovereign were lowered to ‘A-/A-2’. The outlook is negative. The transfer and convertibility (T&C) assessment on Bahrain remains at ‘BBB’.
“We are removing the ratings from CreditWatch because of the diminished near-term political tensions and our expectation that increased public spending will lift economic growth next year, while fiscal Implications will be buffered by the GCC support package,” S&P in a statement said.
However, S&P added, we are assigning a negative outlook to the long-term ratings. “This reflects our opinion that a downgrade could occur if political turmoil reemerges and destabilizes the financial system or if Bahrain appears to experience a continued asset drain due to the fallout from this year’s unrest. Sustained high government deficits, potentially coupled with difficulties in implementing the GCC support package, could also negatively alter our view of Bahrain’s creditworthiness,” it said.
“The ratings could stabilize at the current level if the political process stems the deterioration in the social contract and precludes the escalation of internal tensions. In addition, the effects of the boost in public investment could render an improved picture of Bahrain’s economic growth prospects, also supporting the current rating.”