(Bloomberg) — Bahrain’s outlook was raised to positive by S&P Global Ratings on expectation the government will continue efforts to reduce its budget deficit and that it will benefit from high oil prices.
The ratings agency revised the outlook from stable and affirmed its ‘B+/B’ long- and short-term foreign and local currency sovereign credit ratings on Bahrain, it said in a statement late on Friday.
“Solid growth in non-oil receipts and budget consolidation measures are easing pressure on Bahrain’s fiscal position,” and there’s expectation to put debt to gross domestic product “on a more sustainable path,” S&P said. “We also assume the country’s external vulnerabilities will decline amid current account surpluses.”
Bahrain’s energy industry isn’t on the same scale as other Gulf states. It produces around 200,000 barrels of oil a day, compared with about 11 million barrels for Saudi Arabia and more than 3 million barrels for the United Arab Emirates. The Gulf’s smallest economy said earlier this year it was hiring advisers to help sell stakes in some of its oil and gas assets amid efforts to open up an industry closed to foreign investments for decades.
Among the policies welcomed by the agency were expenditure cuts and a doubling of value-added taxes in January.
Some of the benefits to Bahrain’s “relatively diverse” economy include its proximity to the large Saudi market, strong regulatory oversight of the financial sector and a low-cost environment, S&P said. It estimated Bahrain’s GDP per capita at about $27,300 for this year.
The agency expects the country’s economy to expand 4.8% in 2022, before slowing to about 2.5% for the 2023-25 period amid gradually declining commodity prices.
—With assistance from Matthew Martin.