Country Report Bahrain May 2009

Summary

In 2009-10 the rule of the king, Hamad bin Isa al-Khalifa, is expected to remain broadly secure, with the Al Khalifa family retaining control over the executive branch of government and the legislature remaining weak.
There will be underlying tensions over economic inequalities, the halting pace of political liberalisation and perceptions of sectarian discrimination.
The main foreign policy concern will be Iran's (officially civilian) nuclear programme, although Bahrain will seek to maintain cordial ties with Iran.
The central government budget is forecast to record deficits of some 5.8% of GDP in 2009 and 5.4% in 2010 as lower oil prices constrain revenue.
The fall in oil prices will give more urgency to efforts to diversify revenue, possibly including the introduction of value-added tax (VAT).
Bahrain will continue to take part in efforts to create a Gulf monetary union, despite the UAE's decision to pull out of the project. Progress may be slow.
Real GDP growth is forecast to slow to 3.1% in 2009, as international demand for Bahrain's exports weakens, but will recover modestly to 3.3% in 2010.
Bahrain's current account is expected to record surpluses of 4% of GDP in 2009 and 4.9% of GDP in 2010.

Parliament has approved a new, codified version of the family law, to apply to the Sunni religious courts that determine family matters for the Sunni minority. Shia clerics have resisted a similar move for their community.
The government has published in the Official Gazette a law that in effect abolishes the so-called sponsorship system from August. The law goes a long way towards liberalising the non-Bahraini labour market.
Parliament has been finalising a bill to further liberalise the water and electricity sector.
Balance-of-payments data for 2008 have shown that the current-account surplus fell to BD849m (US$2.2bn) from BD1.1bn (US$2.9bn) in 2007.
Stockmarket activity has remained subdued compared with most of 2008, but many major companies remain profitable, albeit less so than last year.
The International Banking Corporation (IBC), a relatively small Saudi-owned wholesale bank, has become the first financial institution based in Bahrain to default on its debt since the beginning of the current global financial crisis.
A deal to raise long-term oil production at Bahrain's only fully owned oilfield has been reached with Occidental Petroleum and Mubadala Development.

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