Bahrain Country Risk Report Q2 2016
External financing from the rest of the GCC will help to shield theBahraini non-oil sector from the ongoing retrenchment in publicspending. Despite the negative impact of subsidy cuts on internaldemand, we forecast Bahrain to grow at a relatively robust rate of2.9% this year and 2.6% in 2017.
Bahrain's reputation as a stable and welcoming location to dobusiness in the Gulf has suffered as a result of the volatile politicalclimate. At the moment, it remains to be seen if Manama will be ableto compete with Doha and Dubai in attracting investment into theall-important hospitality and financial services industry.
The economy's medium-term outlook remains contingent upon alasting solution being found to the current political crisis. Unfortunately,we maintain our guarded outlook on the prospects that thegovernment and opposition can come to some form of agreementin the near term.
Bahrain's weak medium-term fiscal prospects will force the governmentto make difficult choices. We believe that Manama will havelittle option but to introduce new taxes over the coming years, whilethe issue of spending consolidation will loom large on the agenda.
Support from Saudi Arabia could delay these pressures, but wouldentail a significant loss of sovereignty.
The Central Bank of Bahrain (CBB) will continue to follow a procyclicalmonetary policy over 2016, raising interest rates in linewith the US Federal Reserve's moves. Although the government'ssubsidy cuts will trigger inflation, continued strength in the US dollar,subdued commodities prices and the CBB's rate hikes will help tooffset inflationary pressures.
- Executive Summary
- Core Views
- Key Risks
- Chapter 1: Economic Outlook
- SWOT Analysis
- BMI Economic Risk Index
- Economic Growth Outlook
- External Financing Shielding Growth From Fiscal Pressures
- External financing from the rest of the GCC will help to shield the Bahraini non-oil sector from the ongoing retrenchment in public
- spending. Despite the negative impact of subsidy cuts on internal demand, we forecast Bahrain to grow at a relatively robust rate of
- 2.9% this year and 2.6% in 2017.
- TABLE: MAIN INFRASTRUCTURE AND INDUSTRIAL DEVELOPMENTS
- GDP By Expenditure
- TABLE: COMPONENTS OF GDP
- TABLE: GOVERNMENT CONSUMPTION FORECASTS
- TABLE: PRIVATE CONSUMPTION FORECASTS
- TABLE: FIXED INVESTMENT FORECASTS
- TABLE: NET EXPORTS FORECASTS
- Monetary Policy
- Continuing Rise In Rates Throughout 2016
- The Central Bank of Bahrain will continue to follow a pro-cyclical monetary policy over 2016, raising interest rates in line with the US
- Federal Reserve's moves. Although the government's subsidy cuts will trigger inflation, continued strength in the US dollar, subdued
- commodities prices, and the central bank's rate hikes will help to offset inflationary pressures.
- Monetary Policy Framework
- Chapter 2: 10-Year Forecast
- The Bahrain Economy To 2025
- Political Risk And Oil Prices Hit Outlook
- Bahrain's economy will be able to post relatively moderate levels of real GDP growth over the coming decade. That said, the ongoing
- political crisis has raised a host of questions surrounding Bahrain's long-term outlook, while lower oil prices will intensify the country's
- fiscal vulnerabilities.
- TABLE: LONG-TERM MACROECONOMIC FORECASTS
- Chapter 3: Political Outlook
- SWOT Analysis
- BMI Political Risk Index
- Domestic Politics
- Economic Reform Efforts Carry Political Risks
- Deteriorating relations with parliament, and the unresolved political stalemate between the ruling Khalifa family and the majority Shi'a
- population, will complicate the government's economic reform efforts over the coming years. Fiscal austerity risks undermining the
- regime's remaining base of support and fuelling further political instability.
- TABLE: POLITICAL OVERVIEW
- TABLE: COMPOSITION OF NATIONAL ASSEMBLY
- Long-Term Political Outlook
- Sun, Sea And Sectarianism: Prospects For Future Stability Assessed
- Bahrain's political future is complicated by growing tensions between the Sunni elite and the Shi'a majority, labour and population
- imbalances, the need to stay on side with both Iran and Saudi Arabia, and economic vulnerability.
- Chapter 4: Operational Risk
- SWOT Analysis
- Operational Risk Index
- Operational Risk
- TABLE: OPERATIONAL RISK
- Trade Procedures And Governance
- TABLE: MIDDLE EAST AND NORTH AFRICA – TRADE PROCEDURES AND GOVERNANCE RISK
- TABLE: EXPORT AND IMPORT DOCUMENTS
- TABLE: TRADE PROCEDURES BREAKDOWN
- Vulnerability To Crime
- Chapter 5: BMI Global Macro Outlook
- Global Macro Outlook
- Downside Risks Gather Momentum
- TABLE: GLOBAL ASSUMPTIONS
- TABLE: DEVELOPED STATES, REAL GDP GROWTH, %
- TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
- TABLE: EMERGING MARKETS, REAL GDP GROWTH, %
- TABLE: MACROECONOMIC DATA & FORECASTS