Fitch cuts Bahrain’s credit rating

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Fitch Ratings has downgraded Bahrain’s long-term foreign currency issuer default rating (IDR) to BB+ from BBB- and long-term local currency IDR to BB+ from BBB. The outlooks are stable.

The issue ratings on Bahrain’s senior unsecured foreign and local currency bonds have also been downgraded to BB+ from BBB- and BBB, respectively. The country ceiling has been affirmed at BBB+ and the short-term foreign currency IDR has been downgraded to B from F3.

“Lower oil prices are causing a marked deterioration in Bahrain’s fiscal position,” Fitch said. “There is progress in fiscal consolidation, but not a clear path towards reaching a more sustainable position. Fitch expects general government debt to rise to nearly 80 per cent of GDP in 2016 from around 62 per cent of GDP in 2015, well above the BBB and BB medians of around 40 per cent.”

Fitch expects the general government budget deficit to increase to 15.4 per cent of GDP in 2016, from 14.8 per cent in 2015. This is based on the assumption that Brent blend crude oil will average $35 a barrel in 2016.

“The policy response has been insufficient to significantly ease the unfavourable fiscal and oil price dynamics,” Fitch said.