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Country Forecast Bahrain

  • ID: 2138642
  • Country Profile
  • July 2020
  • Region: Bahrain
  • 50 Pages
  • The Economist Intelligence Unit
Background: Bahrain became independent from the UK in 1971. The increasingly despotic rule of the country's first ruler, Isa bin Salman al-Khalifa, led to a violent backlash by predominantly Shia elements during the 1990s. Following the death of Sheikh Isa in 1999, his son and successor, Hamad bin Isa al-Khalifa, has attempted to implement a programme of gradual political reform, but has made only halting progress. Widespread protests in early 2011 brought about a security crackdown.

Political structure: Bahrain ceased to be an emirate and became a constitutional monarchy in February 2002, as part of King Hamad's effort to distance himself from the autocratic rule of his father. Although constraints on press freedom and political activity were loosened to some extent after King Hamad's accession, they have since been re-imposed following protests of early 2011, and control over policymaking remains in the hands of the king and the ruling Al Khalifa family. The bicameral National Assembly (parliament) came into being in 2002, but the opposition objected to the limits on the power of the elected house (which is largely offset by a strong upper house appointed by the king). Parliament can propose (but not draft) legislation and has the right to amend and reject the budget.

Policy issues: The government is seeking to reduce unemployment by promoting private-sector growth, offering incentives to firms to hire Bahrainis and increasing the local skills base. However, persuading businesses to replace cheaper expatriate workers with more expensive local labour will prove difficult. Moreover, with the country's hydrocarbons reserves limited and dwindling, the government will be unable to guarantee local citizens employment in the public sector.
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Country Forecast Bahrain

Bahrain--highlights: Political outlook

Bahrain--highlights: Business environment outlook

Bahrain--highlights: Economic outlook

Bahrain--highlights: Demographic outlook

Bahrain--highlights: Market opportunities

Bahrain--highlights: Long-term outlook

Fact sheet

Political outlook: Political forces at a glance

Political outlook: Political stability

Political outlook: Political and institutional effectiveness

Political outlook: Election watch

Political outlook: International relations

Business environment outlook: Business environment rankings

Business environment outlook: Bahrain's business environment at a glance
Policy towards private enterprise and competition
Policy towards foreign investment
Foreign trade and exchange controls
The labour market
Technological readiness

Business environment outlook: Macroeconomic environment
Low oil prices and a global recession will compound other challenges

Business environment outlook: Policy towards private enterprise and competition
The private sector will grow through PPP projects and support for SMEs

Business environment outlook: Policy towards foreign investment
Restrictions on foreign investment are being reduced in key sectors

Business environment outlook: Foreign trade and exchange controls
Bahrain will keep the foreign-trade and exchange-controls regime open
The currency peg faces significant threats despite a Saudi backstop

Business environment outlook: Taxes
Bahrain might need to introduce more taxes over the coming years
VAT is the most likely current tax to be raised in 2020-24

Business environment outlook: Financing
Bahrain's financial sector faces stiff regional competition from its Gulf neighbours

Business environment outlook: The labour market
Parliament and unions are pushing for greater Bahrainisation

Business environment outlook: Infrastructure
Grants from Bahrain's GCC neighbours will support infrastructure development

Business environment outlook: Technological readiness
Bahrain will continue to grow as a fintech hub

Economic forecast: Policy trends

Economic forecast: Fiscal policy

Economic forecast: Monetary policy

Economic forecast: International assumptions

Economic forecast: Economic growth
The impact of the coronavirus: global and regional assumptions
Economic growth

Economic forecast: Sectoral trends
Travel restrictions will decimate tourism activity in the short term

Economic forecast: Inflation

Economic forecast: Exchange rates

Economic forecast: External sector

Economic forecast: Foreign direct investment in Bahrain
Stocks and flows
Origin and distribution

Demographic assumptions
The worsening economic outlook will lead to an outflow of expatriate workers early in 2020-24
Private-sector jobs will continue to be dominated by expatriates

Market opportunities: Market outlook
A coronavirus-induced recession and longer-term fiscal rationalisation will weigh on consumption

Long-term outlook: The long-term outlook

Long-term outlook: Long-term trends
Climate change and sustainability
Technological developments

Long-term outlook: Methodology for long-term forecasts
Growth projections
Definitions of variables
The independent variables include:
Summary of findings
Productivity growth

Data summary: Global outlook

Data summary: Gross domestic product, current market prices

Data summary: Gross domestic product, at constant prices

Data summary: Gross domestic product by sector of origin

Data summary: Growth and productivity

Data summary: Economic structure, income and market size

Data summary: Fiscal indicators

Data summary: Monetary indicators

Data summary: Employment, wages and prices

Data summary: Current account and terms of trade

Data summary: Foreign direct investment

Data summary: External debt

Data sources and definitions
Global data
Domestic data

Guide to the business rankings model
Outline of the model
Calculating the rankings
Measurement and grading issues

Indicator scores in the business rankings model
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