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Fitch Affirms Bahrain's Rating at 'B+'; Outlook Stable

Fitch Affirms Bahrain's Rating at 'B+'; Outlook Stable

Saturday, 15 August, 2020 - 04:30

Fitch Ratings has downgraded Bahrain's Long-Term Foreign-Currency Issuer Default Rating (IDR) to 'B+' from 'BB-' in light of the impact of lower oil prices and the coronavirus pandemic.


Bahrain's outlook is stable, Fitch Ratings said in a statement on Friday.


The COVID-19 pandemic and the lower oil prices have marked increases in the budget deficit and government debt, and caused a sharp gross domestic product contraction for Bahrain, Fitch said.


Bahrain's government revenue fell 29% in the first half of 2020, the country's state news agency said on Monday.


Fitch said it forecast the state budget deficit to widen to 15.5% of GDP in 2020 from 4.6% of GDP in 2019.


According to the agency, budget spending will be pushed up by emergency spending of BHD287 million (2.0%-2.5% of forecast 2020 GDP), but contained by efforts to reduce opex by at least BHD100 million.


It noted that the state budget deficit will narrow to 5.3% of GDP in 2022 and the primary deficit will reach close to balance, as oil prices stage a mild recovery.


"We expect that the government will display commitment to gradually improving fiscal performance in the 2021-2022 budget (to be passed before the end of the year). However, there is considerable uncertainty about how the medium-term fiscal plan will be adjusted in light of the pandemic impact," Fitch said in its report on Bahrain.


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