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S&P downgrades Bahrain's outlook to 'negative' on weak financing conditions

Global ratings agency S&P Global revised Bahrain's outlook to "negative" from "stable" on Wednesday, citing ongoing market volatility and weaker financing conditions that could increase the government's interest burden.

Lower oil prices, maintenance at the Abu Sa'fah oil field, market volatility affecting funding costs, and higher social spending are expected to keep fiscal deficits elevated.

The agency noted that fiscal reform measures might not be sufficient to reduce the debt-to-GDP ratio, while Bahrain's foreign currency reserve position remains weak.

Bahrain's non-oil revenue measures, including the introduction of value-added tax in 2019, which was doubled to 10% in 2022, have been offset by rising social spending and interest costs, with the economy still highly dependent on oil prices.

S&P projects the fiscal deficit will widen to about 7% of the country's GDP in 2025, compared with 5.2% in 2024 and 4.9% in its previous review.

Bahrain's long- and short-term foreign currency sovereign credit ratings were affirmed at "B+/B"