Country Report Bahrain January 2009

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 some political tensions.
• Police allegations that a number of young men planned to carry out bomb attacks in December 2008 highlight the risk that violence could increase and appear to be prompting a wide-ranging crackdown on opposition activists.
• 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 and boost living standards in 2009-10 is likely to be severely constrained by lower oil prices.
• In the light of further weak economic data, the Economist Intelligence Unit now projects a marginal contraction in the global economy in 2009.
• 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.
• Real GDP growth is forecast to slow to 3% in 2009 as regional and international demand for Bahrain's exports of goods and services weakens, then fall slightly, to 3%, in 2010.
• Bahrain's current account is expected to record a small deficit of 1% of GDP in 2009, its first since 2002, but to return to surplus in 2010.

Monthly review

• The authorities have announced the arrest of 15 men accused of plotting bomb attacks "to disrupt national security and threaten the lives of citizens" on Bahrain's national day, December 17th.
• A number of well-known opposition activists have subsequently been arrested, including the leaders of the al-Haq movement, which calls for further democratisation and boycotts parliament in protest against its limited powers.
• The Central Bank has cut its one-week deposit rate to 0.75%, from 1.5%, and its repo rate from 3.5% to 2.75%, following US interest rate cuts in December.
• Parliament has been debating whether the 2009-10 budget should be based on an oil price of US$40/b or US$45/b.
• The Saudi Telecom Company has won Bahrain's third mobile-phone licence.
• Construction work is reported to have stopped on the US$550m AlSalam Resort project, being built on reclaimed land by Sama Dubai.
• Crude oil production has fallen fell by 1.1% year on year in the third quarter of 2008, to 16.8m barrels, or an average of 184,000 barrels/day.

Source: Country Report

This report covers the following industry codes:
SIC Code: 60;70;15
NAICS Code: 52;72;23