Standard & Poor's Ratings Services revised its outlook on the Kingdom of Bahrain to negative from stable and affirmed its 'BBB/A-2' long- and short-term foreign and local currency sovereign credit ratings.
At the same time, S&P revised their outlook on the Central Bank of Bahrain to negative from stable and affirmed their 'BBB/A-2' long- and short-term counterparty credit ratings on the bank , said a report published available at the agency official web site .
S&P said "We think a period of lower oil prices will exacerbate existing structural weaknesses in Bahrain's public finances. If the resulting squeeze on government revenues does not translate into reform that improves the sustainability of Bahrain's fiscal position, this could put pressure on the ratings. However, our growth expectations for Bahrain remain stable, linked to forthcoming disbursements from the Gulf Cooperation Council (GCC) Development Fund and to Bahrain's relatively diversified economic base that government policy has encouraged. These factors support the ratings."
Through end-September 2014, Bahrain derived 65% of its fiscal revenues from crude oil receipts, which are part of the 84% of total revenues stemming from the oil and gas industry.
At the time of our last review of Bahrain in June 2014, we assumed that oil prices would average $103 per barrel over 2014-2017. We have now revised this assumption down by more than $20 per barrel , said S&P.
Absent corrective measures, the lower oil price will result in an approximate 10% decline in 2015 government revenues (against those estimated in 2014), added the report.
As for the outlook ; S&P said "The negative outlook reflects our view of Bahrain's weakening fiscal profile and its uncertain policy response. We could lower the ratings over the next year if our current fiscal deficit assumptions are materially exceeded, or if measures to combat falling government revenues do not aim for a structural improvement in Bahrain's public finances that would in turn reduce its reliance on oil revenue and contain expenditures".
We could also lower the ratings if GCC development funds are not forthcoming as expected, causing our fiscal deficit assumptions to be materially exceeded or growth to be substantially lower than we currently expect , noted S&P .
We could revise the outlook to stable if the government embarks on a credible path to fiscal sustainability , added S&P.
At the same time, S&P revised their outlook on the Central Bank of Bahrain to negative from stable and affirmed their 'BBB/A-2' long- and short-term counterparty credit ratings on the bank , said a report published available at the agency official web site .
S&P said "We think a period of lower oil prices will exacerbate existing structural weaknesses in Bahrain's public finances. If the resulting squeeze on government revenues does not translate into reform that improves the sustainability of Bahrain's fiscal position, this could put pressure on the ratings. However, our growth expectations for Bahrain remain stable, linked to forthcoming disbursements from the Gulf Cooperation Council (GCC) Development Fund and to Bahrain's relatively diversified economic base that government policy has encouraged. These factors support the ratings."
Through end-September 2014, Bahrain derived 65% of its fiscal revenues from crude oil receipts, which are part of the 84% of total revenues stemming from the oil and gas industry.
At the time of our last review of Bahrain in June 2014, we assumed that oil prices would average $103 per barrel over 2014-2017. We have now revised this assumption down by more than $20 per barrel , said S&P.
Absent corrective measures, the lower oil price will result in an approximate 10% decline in 2015 government revenues (against those estimated in 2014), added the report.
As for the outlook ; S&P said "The negative outlook reflects our view of Bahrain's weakening fiscal profile and its uncertain policy response. We could lower the ratings over the next year if our current fiscal deficit assumptions are materially exceeded, or if measures to combat falling government revenues do not aim for a structural improvement in Bahrain's public finances that would in turn reduce its reliance on oil revenue and contain expenditures".
We could also lower the ratings if GCC development funds are not forthcoming as expected, causing our fiscal deficit assumptions to be materially exceeded or growth to be substantially lower than we currently expect , noted S&P .
We could revise the outlook to stable if the government embarks on a credible path to fiscal sustainability , added S&P.
Source:
Mubasher
