Standard & Poor’s adjusts Bahrain’s outlook to stable amid deficit concerns – CNN Economic

On Friday, Standard & Poor’s credit ratings agency revised the outlook for the Kingdom of Bahrain’s economy from positive to stable, indicating spending pressures that may push the fiscal deficit to a wider range than previously expected.

According to Reuters, Standard & Poor’s maintained its rating at (B/B+) for Bahrain, and said it expects the government to implement measures to reduce its budget deficit and benefit from additional support from other Gulf countries if necessary.

She explained in a statement, “We expect the government to reactivate reforms to strengthen its financial position, by increasing non-oil revenues until 2026.”

The agency now expects a fiscal deficit of 3 to 4 percent of Bahrain’s GDP over the 2023-2026 period, compared to about 2 to 3 percent in its previous review.

Fitch agency placed Bahrain’s rating at (B+) with a stable outlook in July, while Moody’s changed its outlook for Bahrain to stable from negative and affirmed the (B2) ratings in April of last year.

Growth of Bahrain’s economy

In the first quarter of 2023, Bahrain recorded economic growth of 2 percent, driven by non-oil gains as oil production declined due to seasonal maintenance work.

According to estimates by the Bahraini Ministry of Finance and National Economy, GDP growth is expected to reach about 2.9 percent during the current year, and to reach about 3.2 percent by next year.

The Ministry also expected the non-oil sector to grow by between 3.5 and 3.8 percent during the current and next years, noting that it contributed about 82.9 percent of Bahrain’s gross domestic product during the second quarter of 2023.

The non-oil sectors in Bahrain vary between the sectors of financial projects, manufacturing industries, communications and transportation, building and construction, real estate activities and business services, hotels and restaurants, and social services, in addition to the trade sector.

The transportation and communications sector also recorded the fastest annual growth rate in Bahrain’s economy, at about 13.3 percent, while the hotels and restaurants sector recorded a growth of about 9.6 percent on an annual basis. This reflects the increase in passenger traffic.

Earlier this year, the oil-producing country introduced a new (golden license) offering benefits to companies that bring large-scale investment projects to the small Gulf state, as part of its quest to reduce debt while promoting growth and job creation.