Bahrain junked by S&P
Bahrain junked by S&P
Bahrain has been stripped of its investment grade credit rating by Standard & Poor’s amid the swoon in crude prices which is now in its twentieth month.
The ratings agency lowered its ratings on Bahrain to “BB” with a stable outlook, from “BBB-” with a negative outlook, citing the impact that falling oil prices have had on the kingdom’s revenues and its impact on its public finances.
S&P said:
We expect the impact of lower oil prices will further strain Bahrain’s already weak fiscal and debt metrics to the extent that we now view these credit measures as consistent with a ‘BB’ rating.
It added:
Bahrain’s fiscal vulnerability to oil-price fluctuations has increased since 2009, when, in response to the global economic slowdown and civil unrest, government expenditures started to rise (reaching 30% of GDP in 2012, from 23%in 2008), particularly through recurrent items such as public-sector wages and subsidies. Expenditures have remained elevated since then, including over 2015 and despite consolidation measures.
The ratings agency said the government’s debt burden has doubled since 2009. It expects a net debt position of 35 per cent of GDP by the end of 2016, up from 9 per cent at the end of 2014. It expects that figure to rise to 50 per cent of GDP by 2019.
The move came minutes after S&P cut Saudi Arabia’s rating by two notches earlier in the day.
S&P has lowered its crude forecasts for the year to $40 a barrel for Brent, the international oil marker, down from its previous expectations for Brent to average $55 a barrel. Crude has slumped more than 70 per cent since mid-2014.
It also noted that it doesn’t expect the agreement between Saudi Arabia, Russia, Qatar and Venezuela to freeze oil output at current levels to have a material impact on its oil assumptions.
source blog.fxdd.com
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