Bahrain Country Risk Report Q3 2015 - New Market Report

From: Fast Market Research, Inc.
Published: Sun May 31 2015

Core Views

* Development funds from the GCC and visitor flows from Saudi Arabia will support Bahraini economic activity over 2015. Nevertheless, the slide in oil prices will weigh down on consumer and business confidence, and prompt a moderation in the government's spending plans. We forecast real economic growth to slow to 3.4% this year, from 5.3% in 2013.
* Bahrain's reputation as a stable and welcoming location to do business in the Gulf has suffered as a result of the volatile political climate. At the moment, it remains to be seen if Manama will be able to compete with Doha and Dubai in attracting investment into the all-important hospitality and financial services industry.
* The economy's medium-term outlook remains contingent upon a lasting solution being found to the current political crisis. Unfortunately, we maintain our relatively guarded outlook on the prospects that the government and opposition can come to some form of agreement in the near term.
* Bahrain's weak medium-term fiscal prospects will force the government to make difficult choices. We believe that Manama will have little option but to introduce new taxes over the coming years, while the issue of spending consolidation will loom large on the agenda. Support from Saudi Arabia could delay these pressures, but would entail a significant loss of sovereignty.
* Consumer price inflation (CPI) in Bahrain will remain stable and primarily driven by the country's tight housing market over the course of 2015. We expect interest rates to stay unchanged until the second half of 2015, when the Central Bank will be forced to impose a 50 basis points hike to keep up with the US Federal Reserve.

Full Report Details at

Key Risks To Outlook

* A more pronounced regional crisis stemming from an uptick in tensions between Iran and the West could see risk premiums spike higher, particularly for Bahrain.
* A marked drop in oil prices concomitant with a slowdown in growth in Europe, the US and China would pose a significant risk...

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