Country Report Bahrain December 2008

Outlook for 2009-10

• The rule of the king, Hamad bin Isa al-Khalifa, is expected to remain broadly stable, but discontent over the pace of political liberalisation and the persistence of economic inequalities will result in protests and riots.
• Iran's nuclear programme will remain Bahrain's chief foreign policy concern. Bahrain will remain closely allied with the US, and wary of Iran.
• The government's ability to increase spending, boost living standards and provide new housing in 2009-10 is likely to be severely constrained by lower oil prices, as oil exports provide the majority of government revenue.
• In the light of further weak economic data, the Economist Intelligence Unit now projects a marginal contraction in the global economy in 2009 and only a modest pick-up in 2010.
• We have revised down our forecasts for world oil prices to an average of US$35/barrel for dated Brent Blend in 2009 and US$50/b in 2010, compared with an assumed oil price of US$60/b in Bahrain's 2009-10 budget.
• Real GDP growth is forecast to slow to 2.7% in 2009 as regional and international demand for Bahrain's exports of goods and services weakens, picking up only slightly, to 3%, in 2010.
• Bahrain's current account is expected to record a small deficit of 1.1% of GDP in 2009, its first since 2002, but to return to surplus in 2010.

Monthly review

• The interior minister, Rashid bin Abdullah al-Khalifa, has warned that Bahrainis who criticise the country in meetings overseas without official permission could face prosecution.
• A new culture and information minister, Mai bint Mohammed al-Khalifa, was appointed in November, replacing Jihad bin Hassan Bukamal.
• The ongoing problem of the shortage of affordable housing has prompted a row in parliament as MPs sought to question the housing minister.
• The Central Bank of Bahrain has imposed stringent new reporting requirements on banks in order to monitor the liquidity situation.
• Mumtalakat, the state holding company, has said that it is considering possible acquisitions, including a food company and real estate in Europe and the US.
• Employment growth accelerated to 15.2% year on year in the third quarter.
• Banks' profits suffered in the third quarter as local liquidity conditions tightened, deposit rates rose and the Bahraini and other Gulf stockmarkets weakened.

This report covers the following industry codes:
SIC Code: 60
NAICS Code: 52