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Country Risk Service Bahrain

  • ID: 2118732
  • Country Profile
  • September 2020
  • Region: Bahrain
  • 26 Pages
  • The Economist Intelligence Unit
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Sovereign risk has been downgraded from B to CCC owing to the sharp fall in foreign reserves in 2020. As a result of the coronavirus (Covid-19) pandemic, the economy is estimated to be in a deep recession. An oil price slump has widened the budget deficit, and access to finance is constrained as investor sentiment towards Bahrain grows cautious, both of which present repayment risks, although financial support from Gulf allies provides a sufficient buffer.

The currency risk rating stays at B, despite a deterioration in the score. Tighter financing conditions are set against a widening external imbalance, as oil prices have plummeted. The rating reflects Bahrain's determination to maintain its currency peg to the US dollar, with ongoing financial support from fellow Gulf states. However, the main risk stems from dangerously low foreign reserves (at only around one month of import cover), which leave the dinar vulnerable.

Banking sector risk is B-rated with the score unchanged. Asset prices have crashed, and the banking sector has considerable exposure to the real estate and construction sectors. Commercial banks' negative net foreign asset position is also a point of risk amid tighter international financing conditions for Bahrain.
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Country Risk Service Bahrain

Risk assessment
Sovereign risk
Currency risk
Banking sector risk
Political risk
Economic structure risk

Definitions
Sovereign risk
Currency risk
Banking sector risk
Political risk
Economic structure risk
Overall country risk

Sovereign risk
Current assessment
Positive factors
Negative factors
Rating outlook

Currency risk
Current assessment
Positive factors
Negative factors
Rating outlook
Foreign-exchange regime

Banking sector risk
Current assessment
Positive factors
Negative factors
Rating outlook

Generic risks
Political risk assessment
Economic structure risk assessment

Country risk
Overall country risk

Central scenario for 2020-24: Political stability

Central scenario for 2020-24: Election watch

Central scenario for 2020-24: International relations

Central scenario for 2020-24: Policy trends

Central scenario for 2020-24: Fiscal policy

Central scenario for 2020-24: Monetary policy

Central scenario for 2020-24: Economic growth

Central scenario for 2020-24: Inflation

Central scenario for 2020-24: Exchange rates

Central scenario for 2020-24: External sector

Central scenario for 2020-24: External financing requirement

Central scenario for 2020-24: External debt

Key risk indicators

Ratings summary

Quarterly indicators

International assumptions summary

Economic structure

Public finances

Exchange rates, interest rates and prices

Financial sector

Current account

International liquidity

Foreign payment and liquidity indicators

External trade

External financing requirement

External debt stock

External debt service
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