Bahrain’s credit rating affirmed

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Moody’s Investors Service affirmed Bahrain’s B2 credit rating with a stable outlook, highlighting the country’s economic resilience and potential for future growth, despite ongoing fiscal challenges.

The stable outlook reflects the strong backing of neighbouring GCC countries, particularly Saudi Arabia, Kuwait, and Abu Dhabi, which mitigates concerns about Bahrain’s debt burden. This support provides a crucial safety net, allowing the kingdom to focus on economic diversification and long-term development strategies.

While acknowledging Bahrain’s high debt levels, Moody’s also points to the positive aspects of the country’s economic profile. Bahrain boasts a relatively high per capita income and a well-diversified economy beyond just oil, factors that contribute to the nation’s ability to weather external shocks. Additionally, recent improvements in the island nation’s external sector demonstrate a strengthening financial position.

Looking ahead, the potential development of large hydrocarbon reserves discovered in 2018 offers a promising long-term outlook. While the exact impact on Bahrain’s finances remains uncertain, any increase in oil and gas production could significantly improve the country’s fiscal and external balances.

The stable outlook further underscores Moody’s confidence in the continued support from GCC allies. This backing is expected to remain in place even if oil prices decline or Bahrain’s debt burden poses challenges in attracting investors.

Furthermore, the ratings agency upgraded Bahrain’s local and foreign currency country ceilings, reflecting the country’s robust institutions and moderate political risk. This signals a positive view of Bahrain’s overall governance and stability.

While acknowledging potential risks like a global carbon transition or regional conflict, Moody’s overall assessment highlights Bahrain’s path towards a more diversified and sustainable economy, bolstered by the unwavering support of its GCC partners.