Capital Intelligence (CI), the international credit rating agency, said Wednesday that is has downgraded Bahrain’s Long-term Foreign and Local Currency ratings to ‘BBB+’ from ‘A’ and lowered its Short-term Foreign and Local Currency ratings to ‘A2′ from ‘A1′. The Outlook is ‘Negative’.
The downgrade in Bahrain’s credit ratings reflects the recent increase in political risk, which may have adverse consequences for economic growth and public finances in the short-term and beyond. The downgrade also takes into account the weakening of fiscal flexibility over the past few years, which has reduced the authorities’ capacity to cope with external shocks and will be harder to restore in the current climate.
Bahrain’s ratings are supported by the authorities’ track record of prudent macroeconomic management (notwithstanding weaker fiscal performance in the past two years), moderate – albeit increasing- government debt and the country’s small net external creditor position.
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