Country Economic Forecasts > Bahrain

Following on from S&Ps two notch downgrade to BB in February, Moodys cut one notch to Ba2 in mid-May, pushing Bahrains sovereign rating deeper into junk territory. While it can rely on Saudi Arabia for support, it is likely to find it increasingly difficult to borrow overseas given the increased competition from neighbours and its already high public debt burden of some 60% of GDP at the end of 2015. Moreover, despite the implementation of a number of fiscal measures including an 11% cut in government spending, we still forecast a large budget deficit of some 11.4% of GDP this year, essentially unchanged from 2015 on a 17% drop in oil prices. We expect economic growth to slow further in 2016 to just 1.3% as the cumulative impact of fiscal austerity and lower oil prices takes effect on economic confidence and credit conditions, oil production continues to fall, and growth in its big neighbour Saudi Arabia also slows.