DUBAI: Despite its expectation that Bahrain’s economy will return to growth this year, rating agency S&P revised its outlook for the Gulf country to “negative,” mainly due to its pace of fiscal reform.
Bahrain’s economy contracted by 5.4 percent last year, according to the International Monetary Fund, as the COVID-19 pandemic battered key sectors such as energy and tourism.
This will change in 2021, S&P said, with the oil-producing country’s real gross domestic product rising by 2.7 percent due to rising oil prices and the recovery of regional economic activity.
Bahrain’s COVID-19 vaccination program could also support its recovery, S&P added, as over 60 percent of the eligible population have already been inoculated.
“The government’s vaccination campaign has been successful and the King Fahd Causeway to Saudi Arabia re-opened in May, providing additional impetus to growth,” S&P said, adding that Bahrain benefits from its close proximity to Saudi Arabia.
But there are continued risks to public finance and external and monetary stability, S&P said.
“The negative outlook reflects the increasing risks to the government’s ability to service external debt and maintain confidence in the exchange rate peg,” it added.
