(MENAFN- The Peninsula) Â Moody's credit rating agency put debt issued by Bahrain on watch yesterday, warning of a possible downgrade because the country could face strains over its debt given the weak outlook for oil prices.
Bahrain is a Gulf oil-producing country, but Moody's warned that it could be entering a period of making a loss on every barrel of oil produced. The agency also warned that political and social tension could undermine confidence and growth prospects.
The rating agency highlighted "the country's rising government debt burden, which introduces uncertainty into the country's longer-term debt sustainability."
Saying that it had placed "Bahrain's Baa1 government issuer rating on review for possible downgrade", Moody's said that the oil price needed by Bahrain to make a profit was rising and that this would have an effect on the budget. The agency gave three reasons for its rating decision.
First, "the fiscal implications of Bahrain's high and rising break-even oil price".
Secondly, "the outlook for lower trend economic growth in the country over the medium term."
And finally, "the impact of a low-growth, high government expenditure and weaker oil price scenario on Bahrain's long-term debt sustainability."
The review of the rating would focus on the extent to which the structure of the economy in Bahrain had been weakened, and the outcome of the study was expected within three months.
However, Moody's added that it expected the rating attributed to Bahrain to remain within the range of investment grade ratings. Moody's also warned that "continued political and social tensions may dampen confidence and investment in the economy."
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