The negative market reaction to Lebanon’s 2019 budget suggests that investors are coming round to our view that the government will need to pursue debt restructuring in the coming years. Fiscal woes in Bahrain have also rattled investors this week as evidence mounts that the government is slipping on the austerity agreed as part of a $10bn bailout package from the rest of the Gulf. A default seems unlikely, but investors will probably demand a higher premium to hold Bahraini assets.
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