Bahrain Business Forecast Report

Q4 2009

Publication Date	September 2009
Publisher	Business Monitor
Product Type	Report
Pages	58
ISBN Number	not applicable
Product Code	BMI02739

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Summary

Returning To Normal, But Boom Days Are Over As we move towards the final year of the decade, the signs are that an economic recovery is on track: oil prices are higher, market sentiment is picking back up, and several formerly recessionary economies around the globe are registering positive growth again. As far as Bahrain is concerned, the contraction has only been minimal anyway, in spite of the collapse in oil prices in H208, and growth should return to a sustainable, but lower rate from 2010. Indeed, it may even avoid recession altogether.

The negative effects of the economic crisis on political stability appear to be receding, but Bahrain's parliament will have gained confidence from its successful attempts to influence policymaking, most notably with the budget earlier this year. We think that there will be increased populism on show over the coming years, but in any case, the government is firmly in control, and ultimately policymaking power will lie with the government and ruling family. This being the case, our political risk ratings remain unchanged at 66.5 (short term) and 58.5 (long term).

We do not see Bahrain returning to its previous rates of growth over the coming years: its oil and gas sector will not see any major increases in output until 2014, and the liquidity, global risk appetite and investor sentiment that have driven growth over recent years will not be returning for some time. That said, the growth rates of 1-2% we are projecting for 2010-13 are sustainable, and Bahrain may yet surprise to the upside. The lasting impact of the global credit crunch will be seen in the debt pile however: we see government debt jumping this year, before gradually falling from 2010.

Confidence should return to the financial markets from Q409, particularly in the event of a successful IPO or sukuk/bond issue - we believe there are a number of issuers waiting in the wings for a moment of positive market sentiment - and this would boost banks' confidence. However, we are not going back to the boom days: asset growth has been in double figures since 2003, and soared to 114% in 2007. We see much lower rates of lending going forward.

Content

Executive Summary
Returning To Normal, But Boom Days Are Over
Chapter 1: Political Outlook
- SWOT Analysis
- BMI Political Risk Ratings
- Domestic Politics
- Populist Concerns To Affect Policy
- A number of populist concerns will keep the government from pursuing a purely pro-investment agenda, but
- stability will remain in place, with very little to threaten the overall political structure
- Table: Political Overview
- Regional Outlook
- Why Yemen Should Matter to Obama
- Recent events in Yemen threaten not only the stability of the country, but that of the wider Middle East, and will
- be a headache to US President Barack Obama, with more and more complications being thrown up in the face of
- his attempts to bring stability to the region
Chapter 2: Economic Outlook
- SWOT Analysis
- BMI Economic Risk Ratings
- Economic Activity
- Moving Towards Sustainable Growth From 2010
- The economic indicators look somewhat bleak, but the worst is likely to be over now, and 2010 will bring a revival
- of sorts
- Table: ECONOMIC ACTIVITY
- Fiscal Policy
- Spending Still Rising In Real Terms
- The budget will remain in deficit throughout our forecast period, as Bahrain refuses to relinquish its expensive
- tastes in a lower oil price environment
- Table: FISCAL POLICY
- External Debt
- Debt Creeping Up. But Still Sustainable
- Clearly, the pace of debt accumulation is set to pick up in 2009, with the government returning to the markets to
- finance its first deficit since 2003
- Table: DEBT INDICATORS
- Investment Climate
- Boom Days Are Over, But Recovery On Its Way
- The credit and stock markets should recover in 2010, but the rapid asset growth seen over 2003-2008 will not be
- repeated in the foreseeable future
Chapter 3: 10 Year Forecast
- The Bahraini Economy To 2018
- Positive Core Scenario, With Risks
- The longer-term outlook is broadly positive beyond 2010, assuming a recovery in oil prices and ongoing political
- stability
- Table: Lo ng-Term Macroeconomic Forecasts
- Contents
Chapter 4: Special Report
- The Fate Of ???Chindia'
- Overview
- Although China and India will continue to grow during the global recession of 2009-2010, they are not immune to
- the downturn, and face a number of risks in the near term
- China And India SWOT
Chapter 5: Business Environment
- SWOT Analysis
- BMI Business Environment Risk Ratings
- Business Environment Outlook
- TABLE: BMI BUSINESS AND OPERATIONAL RISK RATINGS
- Institutions
- TABLE: BMI LEGAL FRAMEWORK RATINGS
- Infrastructure
- TABLE: LABOUR FORCE QUALITY
- Market Orientation
- Table: Middle East & Africa Annual FDI Inflows
- TABLE: BMI TRADE RATINGS
- TABLE: TOP EXPORT DESTINATIONS
- Operational Risk
Chapter 6: Key Sectors
- Shipping
- Executive Summary
- The opening of and transfer of the majority of Bahrain's maritime operations to the country's new main port of
- Khalifa bin Salman (KBSP), also known as the Bahrain Gateway, has had a huge impact on the country's
- shipping sector
- TABLE 1: MAJOR PORT DATA
Chapter 7: BMI Global Assumptions
- Global Outlook
- TABLE: GLOBAL ASSUMPTIONS
- Table: GLOBAL And REGIONAL REAL GDP GROWTH