Bahrain's reputation as a stable and welcoming location to do business in the Gulf has suffered irreversible damage as a result of the volatile political climate. At the moment, it remains to be seen if Manama will be able to compete with Doha and Dubai in attracting investment into the all-important hospitality and financial services industry.
While we expect growth to rebound slightly in 2012, we stress that the economy's medium-term outlook remains contingent upon a lasting solution being found to the current political crisis. Unfortunately, we maintain our relatively guarded outlook on the prospects that the government and opposition can come to some form of agreement in the near term.
Major Forecast Revisions
Following the release of updated and rebased historical data from Bahrain's Central Informatics Organisation, we have revised our GDP figures (which accounts for a large discrepancy in 2007). We are projecting real GDP growth of 3.2% in 2013, compared to an estimated 3.0% in 2012.
Key Risks To Outlook
A more pronounced regional crisis stemming from an uptick in tensions between Iran and the West could see risk premiums spike higher, particularly for Bahrain.
A marked drop in oil prices concomitant with a slowdown in growth in Europe, the US and China would pose a significant risk to the country's near-term growth outlook, and likely lead to a marked deterioration to the country's balance of payments and fiscal dynamics.
In terms of the latter, Bahrain's breakeven oil price is now between US$115-120/bbl, which is by far the highest in the Gulf.
Click for Report details:Bahrain Business Forecast Report Q1 2013