S&P Global Ratings affirmed Bahrain’s rating and maintained outlook at positive as the government continues to pursue reforms to boost non-oil revenue and the current account surplus looks set to rise.

The positive outlook is supported by continued financial sector stability and the potential for wider current account surpluses over the forecast horizon, the agency said in a report issued on Monday.

"We also expect the government will continue implementing fiscal reforms to reduce its budget deficit and benefit from additional support from other Gulf Cooperation Council (GCC) sovereigns, if needed," analysts Giulia Filocca and others wrote in the report.

However, there remains implementation risk in the cost cutting measures planned over 2023-2024, the agency warned.

It affirmed its 'B+/B' long- and short-term foreign and local currency sovereign credit ratings on Bahrain. The outlook remains positive. The transfer and convertibility assessment on Bahrain also remains 'BB-'.

Bahrain's fiscal and debt positions strengthened in 2022 on the back of higher oil prices and budget consolidation measures. The Bahraini government is targeting a fiscal balance by 2024, supported by ongoing expenditure cuts and non-oil revenue-enhancing initiatives.

"Although we assume the fiscal balance target is unlikely to be reached by 2024, there remains potential for lower deficits than under our base case (3.2% of GDP over 2023-2026), should the government fully commit to budget consolidation measures."

The agency also said it could raise the ratings over the next 12 months if widening current account surpluses support sustained improvement in Bahrain's external position.

(Writing by Brinda Darasha; editing by Daniel Luiz)