MANAMA: Standard & Poor’s Ratings Services on Friday affirmed its long- and short-term foreign and local currency sovereign credit ratings on the Kingdom of Bahrain at BBB/A-2 with outlook stable.
It also affirmed Central Bank of Bahrain at BBB/A-2.
“Our ratings on Bahrain are supported by the country’s strong external position, its relatively stable growth prospects, the inflow of Gulf Cooperation Council (GCC) development funds, and our medium-term expectation of oil prices of about $97 per barrel. The latter should limit any deterioration in the fiscal profile,” S&P in a statement said.
“The ratings are constrained by our view of Bahrain’s unresolved domestic political tensions and its fiscal dependency on sustained high oil prices and international donor support. The ratings are also constrained by stagnating real GDP per capita growth, which we forecast at barely 1% in 2014-2017. This is low compared to peers at similar wealth levels.
“Given that headline real GDP growth will average about 4% per year, wealth creation is accruing only modestly for the average Bahraini.
“In this regard, socioeconomic frustrations are an element of the island’s political tensions. While we believe a post-crisis status quo has been established, this still includes occasional street protests, entrenched polarization between the two sectarian communities, internal communal divisions, and the relegation of economic policymaking. Parliamentary elections scheduled for October 2014 may indicate whether or not the political process is able to once again start absorbing various grievances. In our view, broad economic growth and the socioeconomic targeting of the GCC development funds–channeling about $4 billion of grants mainly into housing, infrastructure, electricity and water projects in 2014-2017–will likely assist the political process,” it added.