Bahrain has received a double vote of confidence for its economy from two top international rating agencies, Fitch and Standard & Poor's. Fitch Ratings has affirmed Bahrain's long-term foreign and local currency Issuer Default Ratings (IDRs) at ‘A' and ‘A+' respectively, short-term foreign currency IDR at ‘F1' and Country Ceiling at ‘A+'. The outlook on the long-term IDR is stable. Standard & Poor's on Monday reaffirmed Bahrain's credit rating at (A) with stable economic outlook, the same rating received by the country last year. The Central Bank of Bahrain (CBB) has welcomed the evaluation given by both Standard & Poor's and Fitch. This reflects the positive political and economic developments that have been adopted in the country under the leadership of King Hamad, it said. Bahrain's economic policy, which focuses on economic diversification, supporting the private sector and the prudent fiscal and monetary policies contributed to the reaffirmation of the rating, it added. “The CBB welcomes this rating which comes as a testament to the reforms initiated by the government of Bahrain despite the difficult market conditions that prevailed over the last year as a result of the unfolding global financial crisis,” CBB Governor Rasheed Al Maraj said. The prudent fiscal and monetary policies of the country helped in maintaining financial stability and minimizing the impact of the global financial crisis on the domestic economy, he added. “The CBB will continue to maintain high regulatory and supervisory standards to ensure effective and safe operation of the banking sector in Bahrain,” he said. “Bahrain's credit fundamentals and domestic banking sector have proved relatively resilient in the face of the stresses of the last year,” Fitch's Sovereign group associate director Purvi Harlalka said. “Although growth has slowed and the budget has moved into large deficit, government and external debt ratios will remain better than rated peers. ‘Domestic banks' exposure to the property sector will continue to exert pressure on asset quality, but Fitch believes further deterioration can be absorbed with capital ratios remaining adequate, supporting the stable outlook.” Bahrain's rating is supported by its high per capita income relative to the ‘A' range median. A credible monetary and exchange rate regime has contained inflation at 2.8 per cent on average during the last five years. This, together with diversification away from the hydrocarbon sector, has kept output growth higher and more stable than in other ‘A'-rated sovereigns. Nonetheless, financial services and construction, which have accounted for a little over half of the expansion over 2003-2008, are at the heart of the global crisis, with the result that Bahrain's growth will likely be a more subdued 3-4 percent over the medium term. Public finances are also a rating strength. Aided by the oil price rally, the general government balance registered an average surplus of 3.5 per cent of GDP over 2004-2008, which compares favorably with the average deficit of 1.8 per cent of GDP of ‘A'-range peers for the same period.
