Bahrain’s economy contracted by 5.4 percent last year, according to the International Monetary Fund, as the COVID-19 pandemic battered key sectors such as energy and tourism.
This will change in 2021, S&P said, with the oil-producing country’s real gross domestic product rising by 2.7 percent due to rising oil prices and the recovery of regional economic activity.
Bahrain’s COVID-19 vaccination program could also support its recovery, S&P added, as over 60 percent of the eligible population have already been inoculated.
“The government’s vaccination campaign has been successful and the King Fahd Causeway to Saudi Arabia re-opened in May, providing additional impetus to growth,” S&P said, adding that Bahrain benefits from its close proximity to Saudi Arabia.
But there are continued risks to public finance and external and monetary stability, S&P said.
“The negative outlook reflects the increasing risks to the government’s ability to service external debt and maintain confidence in the exchange rate peg,” it added.
