LONDON: The Kingdom of Bahrain’s economic growth is above peers and has been unaffected by the fall in oil prices, according to Fitch.
“Real non-oil growth was 4.9% in 2014, driven by tourism, social and personal services and construction. Execution of GCC-financed project work by local subcontractors will support non-oil growth of 4.0%-4.5% over the forecast period. The tourism industry, which is driven by the Saudi Arabian market, is also expected to continue registering high growth. Major expansions to manufacturing projects will contribute to growth. Inflation is forecast to stay below the peer median,” Fitch in a report said.
“Bahrain’s external balance sheet is stronger than its ‘BBB’ rated peers. The net external creditor position of 164% of GDP compares with a peer median of -5.4% of GDP. After 12 consecutive years of current account surpluses, a small deficit is forecast for 2015. The current account is forecast to return to surplus in 2016. Although gross oil exports are over 50% of current external receipts (CXR), Bahrain also imports oil from Saudi Arabia to refine for export products, meaning net oil exports are 25% of CXR,” it added.
“Governance indicators are below the peer median. There has been no progress in resolving the political stalemate since the opposition Wefaq party boycotted the elections of November 2014. The boycott appears to have lost Wefaq support and the government does not seem inclined to deal with the party’s current leadership. Sporadic low-level violence continues in some Shia villages, but the government has this under control and there is no disruption to business activity.”
“Bahrain’s financing flexibility has allowed it to be a regular Eurobond issuer, most recently raising USD1.25bn at a 30-year maturity in August. The domestic capital market continues to provide the main source of financing. The government has active conventional and Islamic issuance programmes and issued its first 10-year domestic sukuk in January 2015.
“GDP per capita and broader human development and business environment indicators exceed the ‘BBB’ median. The strong regulatory framework and local skill base, combined with low costs, are key supports to the financial sector.”
“Bahraini banks have enjoyed strong profitability, rising capitalisation, and declining NPLs. The smaller Islamic banks have continued to merge. The sector is in the process of preparing for the implementation of Basel III regulations, and the Central Bank is overseeing measures aimed at improving corporate governance and oversight.”