|
|
 |
|
Viewing report
|
|
|
|
Bahrain Business Forecast Report Q2 2011
Business Monitor International, March 2011, Pages: 43
The New Age Of Uncertainty:
The political landscape across the Middle East and North Africa is changing at a remarkable speed. Egypt’s Hosni Mubarak has been forced to resign amid unprecedented protests, while governments throughout the region are scrambling to find ways to placate their own citizens’ demands, anxious to avoid the same fate as Tunisia’s Ali el-Abidine Ben Ali. Protests also erupted throughout Manama in mid-February, putting in doubt the stability of authoritarian rule. In Bahrain, as elsewhere, the government will have to search for a way to accommodate calls for greater political openness without losing its grip on power entirely.
Bahrain’s government has announced a sharp increase in food subsidies and social welfare spending. The move is designed, in particular, to appease potential protestors within the Shi’a community, who have long claimed to have lower living standards than their Sunni counterparts. Whether the measure will be enough to avoid major protests remains uncertain. Demonstrations have so far focused on expressing support for events in Egypt, although some opposition figures have been openly criticising the government. As ever, the Shi’a-Sunni divide could be the flashpoint for political tensions in Bahrain.
Aside from increased pressure on the budget, regional events are not yet having an adverse effect on Bahrain’s economy. In fact, quite the opposite: the uncertainty has helped boost oil prices, which is good news for government coffers. However, it must be noted that Bahrain’s still-heavy dependence on oil, in spite of its seemingly diversified economy, remains a cause for concern. Over the longer term, we see opportunities for growth in other sectors, particularly tourism and infrastructure, with both likely to feel some positive impact from preparations for Qatar’s hosting of the football world cup in 2022.
That said, uncertainty and heightened risk perceptions towards the Middle East as a whole are putting a damper on Bahrain’s business environment. Spreads on Bahraini credit default swaps have risen by more than any other Gulf state since the beginning of the year and by as much as Tunisia, despite the latter’s far more precarious political situation and lower credit rating. The market’s apparent wariness of Bahrain is likely to have more impact on the private sector than on the government’s ability to raise debt, thereby potentially slowing the private sector’s recovery at least in the short term.
|
|
|
|
