Bahrain finances suffer from oil price changes

According to a recent report from Moody’s, the government of Bahrain has experienced strain on its finances due to the oil price shock.

The government’s longer-term issuer rating amount of Baa3 is currently sustained by high per-capita income as well as a good net international investment position.

Now public finances face pressure, as the kingdom expects its deficits to stay wide thanks to an absence of any significant reforms. This will force the country into a continued debt rise in the future.

"The recent oil price shock has further intensified the ongoing deterioration in Bahrain's government finances, given that oil and gas related revenues account for about 90 percent of total government revenues,” Steffen Dyck, an analyst at Moody’s, said. “In addition, the rapid expansion of current expenditure has eroded the kingdom's fiscal flexibility.”

Bahrain is the only member of the Gulf Cooperation Council (GCC) that has experienced continued fiscal deficits since the year 2009.

"We expect that under present conditions, Bahrain's fiscal deficit will likely widen to 14 percent of GDP in 2015, and stay wide at 10 percent in 2016,” Dyck said. “Correspondingly, the government's debt burden would increase to more than 70 percent of GDP by end-2016, from around 46 percent by end-2014.”

Further details can be found online at www.moodys.com under the title “Bahrain, Credit Analysis.”