S&P Global Ratings has downgraded Bahrain’s sovereign credit rating to B, citing mounting fiscal pressures, rising government debt, and continued vulnerability to weaker oil revenues.
The outlook remains stable, reflecting expectations that Bahrain will continue to receive financial support from other Gulf Cooperation Council (GCC) countries.
In its statement, S&P said the downgrade reflects persistent strains on the kingdom’s public finances, noting that government debt has accumulated steadily due to repeated budget deficits and structural fiscal challenges.
The stable outlook suggests that Bahrain’s credit profile will remain anchored by ongoing regional support, particularly from Saudi Arabia, the UAE, and Kuwait, countries that have historically provided financial packages and deposits to help stabilize Bahrain’s economy during periods of stress.
S&P forecasts that Bahrain’s net government debt will rise by around 10% of GDP in 2025, driven largely by off-budget spending and elevated borrowing needs. The continued reliance on hydrocarbons leaves the country’s fiscal path sensitive to oil-price fluctuations, despite recent efforts to diversify revenue sources.
Despite fiscal concerns, Bahrain’s economy has shown signs of modest expansion.
According to official data, real GDP grew 2.5% year-on-year in the second quarter, supported by a 3.5% increase in non-oil activity, a key indicator of the government’s diversification momentum.
Earlier figures showed Bahrain’s economy expanding 2.7% in Q1 2025, underlining a gradual but ongoing recovery outside the oil sector.
However, analysts warn that continued off-budget spending, public-sector wage pressures, and reliance on external support pose risks to sustainability, factors that contributed to S&P’s decision.
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