Country Report Bahrain October 2009

Summary

In 2010-11 the rule of the king, Hamad bin Isa al-Khalifa, is expected to remain broadly secure. The weakness of the legislature suggests that no major changes to policy will arise as a result of the 2010 parliamentary election.
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 less than 1% of GDP in both years as spending continues to grow.
The fiscal deficits will give more urgency to efforts to develop non-oil government revenue, possibly including value-added tax.
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 recover to 3.7% in 2010 and 4.3% in 2011. Inflation is likely to remain contained at below 5% per year.
Bahrain's current account is expected to record surpluses of 5.6% of GDP in 2010 and 3% of GDP in 2011, based on our oil price assumptions.

A new Shia opposition movement that has been coalescing for the past few months has now come together under the name al-Wafa, and represents a challenge to the power of the dominant Shia cleric, Sheikh Issa Qassim.
The interior minister has said the country's naturalisation law is being reviewed in the light of political, economic and security developments.
The Higher Criminal Court has cleared 19 men accused of murdering a policeman last year, whose relatives said they were political prisoners.
A draft agreement on the proposed GCC central bank has been submitted to parliament. It would greatly strengthen central bank independence.
The finance minister, Sheikh Ahmed bin Mohammed al-Khalifa has reaffirmed the government's dollar-peg policy.
The parliamentary chairman has proposed a tax on investment, although this is unlikely to be introduced in the near future.
The labour fund has been researching skills shortages in the labour force.
The Central Bank of Bahrain has released data showing that employment at the end of June was 485,333, 12.2% higher than in the year-earlier period.

This report covers the following industry codes:
SIC Code: 60;10;47;49
NAICS Code: 52;212;48;22