S&P Global Ratings has reaffirmed Bahrain’s “B+/B” credit standing with a stable outlook, recognizing the Gulf state’s commitment to fiscal consolidation despite challenges in 2023. The agency noted that Bahrain’s transfer and convertibility assessment remains at “BB-” and anticipated slower-paced structural reforms aimed at bolstering the non-oil revenue base. S&P’s stable outlook is based on the expectation that Bahrain will continue to implement measures to reduce its budget deficit, potentially benefiting from additional Gulf Cooperation Council support if necessary. The ratings could improve if Bahrain’s fiscal situation exceeds expectations, leading to reduced net debt relative to GDP or widened current account surpluses that strengthen its external position.
Conversely, S&P warned of potential risks, including a significant increase in government debt or a sharp decline in foreign currency reserves, which could hinder debt servicing and monetary policy. The agency highlighted that the government’s efforts up to 2027 will be crucial, despite the considerable deficit expansion in 2023 influenced by elevated interest rates, a one-off social support program, and adjustments in pensioners’ allowances. S&P foresees broader fiscal deficits, averaging 4.4% of GDP from 2024 to 2027. However, it remains optimistic that Bahrain will continue fiscal and structural reforms to strengthen its non-oil revenue base, supported by potential additional financial aid from GCC partners.