S&P Boosts Kuwait to ‘AA-/A-1+’ and Holds Bahrain at ‘B+/B’ as Gulf Ratings Diverge

Kuwait: Strong Assets and Reform Momentum Drive Upgrade

The upgrade reflects Kuwait’s exceptionally strong net asset position anchored by the Kuwait Investment Authority (KIA) and steady progress on Vision 2035 projects, including major developments such as the Northern Economic Zone and Mubarak Al-Kabeer Port.

S&P expects Kuwait’s GDP growth to reach 2% in 2025–2026, rising to 2.6% by 2027–2028, supported by higher oil output and capital investment. Fiscal deficits are projected to average 8.9% of GDP through 2028, though government debt will remain among the world’s lowest - just 13% of GDP in 2025, rising moderately to 24% in 2028.

Acting Finance Minister Sabeeh Al-Mukhaizeem said the upgrade affirms Kuwait’s reform momentum, citing the March 2025 financing law as a key step toward diversifying funding sources. S&P also raised Kuwait’s transfer and convertibility assessment to ‘AA’.

The upgrade positions Kuwait as the highest-rated GCC sovereign, surpassing Qatar, with upside potential if reforms accelerate further.

Bahrain: Ratings Held at ‘B+/B’ as Fiscal Pressures Persist

In contrast, S&P affirmed Bahrain’s rating at ‘B+/B’, noting continued reliance on GCC support and persistent fiscal challenges. Bahrain still has $2.8 billion remaining from the 2018 GCC financial support package.

S&P expects Bahrain’s fiscal deficit to widen to 7.0% of GDP in 2025, before narrowing to 4.4% by 2028 as oil production normalizes and non-oil revenues improve. However, elevated debt levels and weak reserves continue to weigh on creditworthiness.

While the stable outlook signals policy stability, S&P highlighted that significant reform progress would be necessary for future upgrades. Bahrain’s rating remains below regional peers Kuwait, Qatar, and Oman, though S&P noted advantages including a strong financial sector and competitive operating environment.