2012-11-14 22:08:55 - Bahrain Business Forecast Report Q4 2012 - a new country guide report on companiesandmarkets.com

Elevated oil prices, a ramp up in government spending, and financial support from Saudi Arabia should help bolster growth though 2012. That said, a weak outlook for the domestic tourism and financial services sectors will ensure that a return to pre-crisis rates of real GDP growth remain off the cards in the near term. 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 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 Changes

We have revised up our forecasts for 2012 real GDP growth, and now project the economy expanding 2.9% (compared to our previous forecast of 2.5%). Growth is being supported by ample oil-based liquidity and elevated government spending.

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 US$115-120/ bbl, which is by far the highest in the Gulf.

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