Fitch Ratings today affirmed Bahrain’s long-term foreign currency issuer default rating (IDR) at BBB and local currency IDR at BBB with a stable outlook.
The issue ratings on Bahrain’s senior unsecured foreign and local currency bonds have also been affirmed at BBB and BBB+, respectively.
Fitch said the rebound of oil production following disruptions in 2012 helped lift the growth rate to over 5 per cent in 2013. Non-oil sector growth, hampered by budget under-execution and weak investment, fell to 3 per cent.
Fitch said that the disbursement of GCC support funding for projects is underway.
“Of the $4.4bn worth of projects approved to date, 10 tenders (worth USD1.4bn) have been awarded, although work has only commenced on two of these projects (worth about USD40m),” Fitch said. “The remaining awarded tenders are expected to launch in 2014.”
“In addition to supporting non-oil growth, GCC funding will result in budget savings by relieving pressure on capital expenditure,” Fitch said.
Bahrain registered a larger 2013 budget deficit than Fitch forecast largely due to an increase in current spending. Total debt reached about 44 per cent of GDP.
“This places Bahrain firmly above the BBB rated peer median debt level of 40 per cent of GDP, further straining the fiscal profile and exposing it to fluctuations in oil prices,” Fitch said. It said Bahrain’s break-even oil price is projected to surpass $130 a barrel by 2015.
“Political instability has made it difficult to press ahead with subsidy and wage reforms, and parliamentary elections scheduled in November have deferred any planned initiatives until 2015, at the earliest,” Fitch said.
Fitch said Bahrain’s external position is stronger than its BBB rated peers. Bahrain had a current account surplus of around 10 per cent of GDP in 2013.
“Bahrain’s overall net creditor position, estimated by Fitch at over 100 per cent of GDP in 2013, is the strongest of any similar-rated sovereign,” Fitch said.