Mubasher: Moody's Investors Service has maintained its negative outlook on Bahrain's banking system, according to a statement.
The outlook reflects the sector's exposure to government debt, weakening economic growth and the authorities' lower capacity to support banks.
"The outlook for Bahrain's banking system over the next 12 to 18 months is negative, as it has been since 2015," according to Christos Theofilou, a Moody's assistant vice president – analyst.
"The operating environment for Bahraini banks will soften, driven by lower economic growth and increased sovereign debt issuance, as low oil prices sustain large fiscal deficits, leading to an increase in banks' holdings of government bonds,” he added.
Bahrain's growth is expected to slow on the back of oil price decline, stagnant hydrocarbon output and reduced government spending.
Economic growth is likely to decline to around 2.0% in 2017 and 2018 from 3.1% in 2016. Growth of non-oil economy will also fall to 2.5% in 2017-18, from a strong 3.7% in 2016.
Overall lending is expected to rise by 3% in the next 12 to 18 months, spurred by by infrastructure projects.
