Major global ratings boost for Bahrain
Manama, January 11, 2014
Bahrain won a major vote of confidence from a top ratings agency, said a report.
Fitch Ratings has affirmed Bahrain's long-term foreign currency Issuer Default Rating (IDR) at 'BBB' and local currency IDR at 'BBB+'. The outlooks are stable, Fitch said.
The issue ratings on Bahrain's senior unsecured foreign and local currency bonds have also been affirmed at 'BBB' and 'BBB+', respectively, reported the Gulf Daily News, our sister publication.
The agency has simultaneously affirmed Bahrain's Country Ceiling at 'BBB+' and short-term foreign currency IDR at 'F3'.
The affirmation and stable outlook reflect that Bahrain's external position is stronger than its 'BBB' rated peers.
A current account surplus of around 10 per cent of GDP is estimated for 2013, which will be the 10th consecutive year of surplus.
Bahrain's overall net creditor position, at almost 100 per cent of GDP at end-2012, is the strongest of any similar-rated sovereign, Fitch said.
GDP per capita and broader human development and business environment indicators are close to the 'A' median.
The strong regulatory framework and local skill base, combined with low costs, are key supports to the financial sector, the agncy said.
Growth is steady and supported in the medium term by GCC funding.
Real GDP is estimated to have risen by 4.9 per cent in 2013, up from 3.4 per cent in 2012, largely driven by the resumption of oil production after disruptions in 2012.
In 2014 and 2015, as oil growth stabilises, non-oil growth will benefit from disbursement of the GCC project fund, the agency added.
A high estimated break-even oil price (at $122 per barrel for 2013), recurring budget deficits, and rising debt strain Bahrain's fiscal profile and expose it to fluctuations in oil prices, Fitch dsid.
At 42.9 per cent of GDP estimated for 2013, the general government debt-to-GDP ratio has tripled since 2008 and is above the 'BBB' range median.
However, net debt is lower due to government deposits estimated by Fitch at above 20 per cent of GDP.
The banking sector is large, at 650 per cent of GDP, but has weathered a number of global, regional and local shocks in recent years.
The wholesale banking sector's assets (at around 350 per cent of GDP) have stabilised after five years of decline.
Consolidation is continuing in the small Islamic retail banking sector, where there have been some asset quality problems, Fitch said. The stable outlook reflects Fitch's assessment that upside and downside risks to the rating are currently balanced.-TradeArabia News Service