Fitch downgrades Bahrain amid political standoff

AP News
Posted: Mar 03, 2011 11:12 AM
Fitch downgrades Bahrain amid political standoff

The Fitch Ratings agency cut oil-rich Bahrain's credit grade by one notch on Thursday, citing the risks of a drawn-out political standoff and its impact on the island nation's economic growth and public finances.

Bahrain has seen weeks of protests, which have left seven dead, as Shiite opposition groups seek to loosen the Sunni monarchy's 200-year-old grip on power. The Shiites accuse the ruling minority of discriminating against them and politically persecuting them.

"The downgrade reflects Fitch's view that recent political developments will have a short-term impact on growth and result in further fiscal expansion over the medium term," Purvi Harlalka, director of Fitch's Middle East and Africa sovereign ratings division, said in a report.

Harlalka noted that "despite the regime's attempts to engage stakeholders in an inclusive national dialogue, any political reform that will appease the protesters is likely to be over an extended horizon."

Fitch warned that a substantial worsening in the security situation or delays in the political reform process would prompt a further downgrade.

Bahrain still has a good track record in lowering its financial burdens, and rising oil prices should help offset an increase in public debt, the agency noted.

Fitch lowered Bahrain's government debt rating to A- from A. Rival agency Moody's Investors Service could likewise downgrade Bahrain soon, after last month putting the country's rating on review for a cut.