DOLLAR PEG A BOON FOR BAHRAIN

Manama

--

The peg to US$ has helped Bahrain to withstand recent global economic maelstroms, according to Moody’s analysts. A group of analysts led by Jean-Francois Tremblay, Associate Managing Director, on a recent visit to the Kingdom, said that they expect the US$ peg to continue.

Bahrain maintains an exchange rate peg at 0.376 Bahraini dinars to the US$, according to the Central Bank of the Kingdom. Moody’s said that such an arrangement has helped the Kingdom to access conventional and Islamic debt markets in an effective way.

GCC has shown resilience to global turbulence and the average rating from Moody’s for GCC is at the higher end of global ratings, the analysts said. Muted global growth is here to stay and multiple sources of downside risks remain, including China asset price correction, lower oil prices for long, disorderly response to currency volatility and Greek exit. 

The world economy is not facing a threat of deflation, Tremblay added, but warned about the low oil price’s possible impact on the GCC banking system. He said that oil price may lead to low government surpluses, lower public spending & investment or lower confidence. Lower government surplus may lead to lower public sector deposits, in turn leading to lower liquidity. Lower public spending & investment may result in lower private-sector growth and lower public-sector growth can lead to lower GDP growth. Lower confidence can cause lower asset price and lower investment & consumption that might trigger low GDP growth, he explained.