S&P Global Ratings has revised its <a href="https://www.thenationalnews.com/business/economy/2022/09/25/bahrain-posts-highest-q2-economic-growth-in-11-years-at-69/" target="_blank">outlook on Bahrain</a> to “positive” from “stable”, citing the government’s fiscal reforms and <a href="https://www.thenationalnews.com/business/energy/2022/11/25/oil-prices-gain-but-third-straight-weekly-loss-looms-over-demand-concerns/" target="_blank">high crude prices.</a> “The positive outlook reflects the government's ongoing implementation of the updated fiscal balance programme (FBP) by expenditure cuts and revenue-enhancing initiatives, including the doubling of the value-added tax (VAT),” the ratings agency said on Saturday. The Arab country is benefiting from a surge in regional activity tied to higher oil prices. Brent, the benchmark for two thirds of the world’s oil, is currently trading at about $83 a barrel after falling to less than $30 in 2020. Bahrain's economy grew 6.9 per cent in the second quarter of 2022 to record the highest rate of growth in the past 11 years, driven by a strong performance in the country's non-oil sectors involved in the country's economic reform plan. Bahrain, the smallest economy in the six-member GCC bloc, has sought ways to<a href="https://www.thenationalnews.com/uae/2022/02/06/bahrain-eyes-tourism-boom-as-mega-projects-provide-blueprint-for-prosperity/" target="_blank"> cut spending </a>and achieve a balanced budget by 2024. It unveiled an economic reform plan last year that seeks to invest about $30 billion in projects to drive post-pandemic growth, boost employment for citizens and attract $2.5 billion in foreign direct investment by 2023. The plan also increased value-added tax from five per cent to 10 per cent, in a move to help the kingdom balance its budget by 2024. The ratings agency said it expects Bahrain’s economy to grow by 4.8 per cent this year before slowing to about 2.5 per cent from 2023 to 2025 on the back of gradually declining commodity prices and slowing global growth. Brent oil prices will average $90 a barrel in 2023 before falling to $80 in 2024, according to S&P’s estimates. “Over the medium term, the government's economic recovery plan will drive non-oil activity to spur domestic employment and attract investments in strategic sectors such as tourism, housing, roads, airports, and electricity,” the ratings agency said. New projects include the creation of five communities on newly constructed islands, and increasing Bahrain’s total land area by more than 60 per cent. One of the largest areas planned, called Fasht Al Jarim, will span 183 square kilometres and provide a residential, logistics and tourism centre that will have a new airport. “We expect the favourable external environment will enable Bahrain to achieve another current account surplus of 10.9 per cent of GDP in 2022, up from 6.7 per cent in 2021,” said S&P. “Although income payments and workers' remittances will remain a drain on the external balance, stronger receipts from tourism and financial services tied to the normalisation of economic activity will help shore up the services account.” Bahrain, which produces about 200,000 barrels per day of crude, is not an Opec member and its production is not restricted by Opec+ commitments. The Opec+, a group of 23 oil producing countries, has reduced its collective output by two million bpd amid demand concerns. Bahrain’s discovery of two new gas fields in the Al Juba and Al Jawf reservoirs adds “further upside” to S&P’s growth projections, the ratings agency said. Prices of natural gas, seen as a transition fuel, have surged following Russia’s invasion of Ukraine, tipping the European economy towards a recession and making inflationary pressures worse. Bahrain's banking system remains “relatively resilient” with regulations broadly in line with those of regional peers, S&P said. Domestic private sector loan growth rose to 5.3 per cent in September from a year earlier, compared with a 4.1 per cent increase at year-end 2021, spurred by the retail sector. “We forecast credit extension will remain robust at 6 per cent over 2022-2025, owing to strong economic activity,” it added.