FX.co ★ S&P Downgrades Bahrain's Outlook to 'Negative'

On April 23, 2025, S&P Global Ratings revised Bahrain's fiscal outlook from stable to negative, attributing this change to sustained fiscal pressures and declining oil prices. Bahrain's gross government debt is anticipated to escalate to 144% of GDP by 2028, up from 130% in 2024, due to stagnated fiscal reforms, reduced oil income, and market instability. These elements are expected to impose additional stress on interest payments and foreign currency reserves. The fiscal deficit is forecasted to expand to 7.0% of GDP in 2025 from 5.2% in 2024, driven by increased social spending and higher funding costs. Although measures have been implemented to enhance non-oil revenue—such as the introduction and subsequent increase of VAT to 10% in 2022—expenditures have surpassed initial projections. S&P indicated that the outlook could stabilize if the government introduces significant fiscal reforms and strengthens its foreign currency reserves. Bahrain's long- and short-term foreign currency sovereign credit ratings remain steady at "B+". In contrast, Moody's credit rating for Bahrain is established at B2 with a stable outlook.