“The expected rating is in line with Bahrain’s foreign currency Issuer Default Rating (IDR) of ‘BBB’/Stable. The rating was affirmed on 3 August 2011,” Fitch in a statement said.
“Bahrain’s economic growth in 2011 was weighed down by political unrest during the first half of the year affecting the banking sector and tourism, although high oil prices and increased production helped sustain the economy, with real GDP growth of around 2% registered for 2011,” it added.
“The weaker macroeconomic backdrop and increased social spending increased pressure on public finances, with public debt to GDP rising to 36.4% in 2011, from around 16.4% in 2008, but in line with the BBB median of around 39% for the same period. Forthcoming support from Saudi Arabia and other Gulf Co-Operation Council (GCC) countries is expected to offset further rises in social spending, helping to support Bahrain’s credit rating,” Fitch statement said.
“As a net external creditor to the tune of 60% of GDP in 2011, Bahrain’s external sector continues to be one of its main credit strengths. The current account continues to be in surplus, officially estimated at 12.5% of GDP in 2011.”
Fitch has previously said that a worsening in the security situation and protracted delays in the political reform process would result in renewed downward pressure on the rating. By contrast, genuine political reform would lead to a sustainable improvement in Bahrain’s political environment, with positive consequences for the fiscal and economic outlook and the rating.