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Cablegate: Fitch Upgrades Bahrain's Sovereign Credit Rating

VZCZCXRO1026
PP RUEHDE RUEHDIR
DE RUEHMK #0815 2391107
ZNR UUUUU ZZH
P 271107Z AUG 07
FM AMEMBASSY MANAMA
TO RUEHC/SECSTATE WASHDC PRIORITY 7182
INFO RUEHEG/AMEMBASSY CAIRO PRIORITY 0970
RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE PRIORITY
RUCPDOC/USDOC WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY

UNCLAS MANAMA 000815

SIPDIS

SENSITIVE
SIPDIS

CAIRO FOR SEVERENS
COMMERCE FOR 4520/ITA/MAC/ONE/HOFFMAN
TREASURY FOR ROSE

E.O. 12958: N/A
TAGS: ECON EFIN ETRD ECTRD BA
SUBJECT: FITCH UPGRADES BAHRAIN'S SOVEREIGN CREDIT RATING

1. (U) International financial ratings agency Fitch August 24
upgraded its sovereign credit rating for Bahrain from
"A-" to "A," with a stable outlook. "Improvements in
domestic and external solvency ratios, continued strong-non
oil growth and advances in economic and political reform
explain the rating upgrade," said Fitch Middle East and
Africa Sovereign Team Associate Director Charles Seville. In
announcing the upgrade, Fitch noted that Bahrain enjoyed GDP
growth of 7.1 percent in 2006, driven mainly by the services
sector in general and financial services in particular. The
Fitch statement said the GOB had capitalized on "benign
external conditions to pursue structural and labor reforms"
and said the emergence of an opposition bloc in the national
assembly was a positive development for the political
climate. The Fitch upgrade follows Standard and Poor's July
26 affirmation of an "A" long-term and an "A-1" short-term
sovereign credit rating for Bahrain on the basis of strong
financials.

2. (SBU) Acknowledging the Fitch announcement, Central Bank
of Bahrain Governor Rashid Al Miraj said August 26 in the
Gulf Daily News, "While higher oil prices have helped,
Bahrain's economic buoyancy is due as much to the deep
economic and structural reforms being implemented." (Note:
Bahrain's financial services sector now accounts for roughly
28 percent of GDP, more than double the 12 percent share
contributed by oil. However, increased liquidity resulting
from high oil prices has been an undeniable spur to the
growth of the financial sector. Petroleum processing profits
of largely state-owned firms account for more than 70 percent
of government revenues. End Note.)

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Visit Embassy Manama's Classified Website:
http://www.state.sgov.gov/p/nea/manama/
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