Our comprehensive assessment of Bahrain's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Bahrain, as well as the latest industry developments that could impact Bahrain's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Bahrain before your competitors.

Country Risk

Bahrain Country Risk

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Core Views

  • External financing from the rest of the GCC will help to shield the Bahraini non-oil sector from the ongoing retrenchment in public spending. Despite the negative impact of subsidy cuts on internal demand, we forecast Bahrain to grow at a relatively robust rate of 2.9% this year and 2.6% in 2017.

  • Bahrain's reputation as a stable and welcoming location to do business in the Gulf has suffered 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.

  • The economy's medium-term outlook remains contingent upon a lasting solution being found to the current political crisis. Unfortunately, we maintain our guarded outlook on the prospects that the...

Bahrain Operational Risk Coverage (8)

Bahrain Operational Risk

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BMI View: Bahrain suffers from a lack of skilled and suitable labour, due to poor educational standards and a small population. The country's significant levels of public unrest contribute to a considerable risk of violence and conflict, while its cybersecurity infrastructure remains underdeveloped. However, with strong availability and costs of utilities, and highly receptive trade and investment environments, Bahrain is one of the cheapest places in the world to set up certain business ventures. Therefore, with a score of 62.9 out of 100 on BMI 's Operational Risk Index, Bahrain is ranked fifth in the MENA region and sits 43rd globally.

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Labour Risk Pillar Drags Overall Operational Score Down
Bahrain - Operational Risk Scores

Bahrain Operational Risk

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BMI View: Bahrain performs very well (especially in comparison to its regional peers) in terms of its general trade and investment environment. While the country's economic performance does hinder its overall appeal as a trading destination, it is elevated by its minimal trade tariffs, friendly policies towards foreign investors and key free trade agreements with strategic partners. Further incentives for Bahrain as a trade and investment destination are its low tax rates, fast and efficient tax system, as well as its relatively low levels of red tape. While corruption levels in its legal system have reduced over the past few years, recent reports do call into question how independent the country's judiciary really is - more in relation to...

Bahrain Crime & Security

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Bahrain is a relatively stable and secure country in a notoriously unstable region. Boasting a stringent and competent policing infrastructure, Bahrain's crime rates are low. Simultaneously, a developed financial sector and oversight mechanisms mitigate the risks of financial crime. However, underdeveloped cybersecurity policies, and a simmering domestic conflict over democratisation present significant threats to businesses. As a result, Bahrain receives a score of 63.1 out of 100 for its overall Crime and Security risks, placing it fifth in the Middle East and North Africa (MENA) region of 19 states behind Oman, the UAE, Qatar and Kuwait.

Conflict Risk Drags Down Overall Score
Bahrain & MENA Regional Average - Crime & Security Risk Scores
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Bahrain Labour Market

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BMI View: With a sizeable labour force, comprised predominantly of cheap expatriate workers, good life expectancy and strong urbanisation on the one hand and low labour costs and regulations on the other, Bahrain's labour market offers limited risks to investors. What risks there are stem from the limitations of the education system, with a low number of higher education graduates hampering the overall size of the skilled labour pool. As a result, Bahrain receives an overall Labour Market Risk score of 58.4 out of 100, placing the country fifth out of 19 states in the Middle East and North Africa (MENA) region, between Qatar and Jordan.

The score is boosted by Bahrain's strong performance in our Labour Costs Index, where the country comes in...

Bahrain Logistics

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BMI View: Bahrain boasts a developed logistics network, which caters not only for domestic demand, but is increasingly playing a role in its neighbour Saudi Arabia's supply chain. However, the major risk to the country's supply chains is its reliance on one area. This is an issue in the transport sector, with the country reliant on road networks to meet its logistics demand, and in the utilities sector, with Bahrain's power sector dominated by one fuel: gas. The heavy dependence on one mode of transport or one fuel type heightens risk, as should this area be disrupted operations would be negatively impacted as there are no...

Bahrain Industry Coverage (17)

Autos

Bahrain Autos

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Passenger Car and Light Commercial Vehicle Sales
(2013-2019)
e/f = BMI estimate/forecast. Source: CIO, BMI

Key Views

  • 2015 has proved another positive year for Bahraini new car sales, which should be on track for over 70,000 units sold by year end.

  • Looking forward, BMI remains optimistic on the medium-term outlook for the sector, targeting 21.3% growth, to around the 87,000 unit mark by 2019.

  • One support to overall passenger car sales numbers as we...

Commercial Banking

Bahrain Commercial Banking

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Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

Consumer Electronics

Bahrain Consumer Electronics

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BMI View: Bahrain is a high-income country, making it a lucrative market for consumer electronics vendors, even as overall market size is limited by the small population. Premium vendors fare particularly well in Bahrain, where over 56% of households are forecast to have incomes of USD50,000 or more in 2016 and there is a strong culture of fashion oriented conspicuous consumption. There are however challenges for vendors operating in Bahrain, most notably the maturity of the devices market, with high penetration even in newer device categories such as smartphones and tablets, requiring vendors to apply targeted strategies due to an absence of 'low-...

Food & Drink

Bahrain Food & Drink

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BMI View: Bahrain's food and drink industry will be one of the region's fastest growing. We forecast positive growth for the industry led by rapid growth in the MGR sector, with a CAGR of 7.4% to 2019. Strengthening economic growth and a stabilising political crisis in Bahrain will restore investor confidence. Furthermore, a business-friendly environment coupled with cheap electricity and fuel prices will lower overheads and costs to encourage growth in the food and drink industry.

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Freight Transport

Bahrain Freight Transport

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BMI View: Bahrain will continue to follow an ambitious infrastructure investment plan in order to increase capacity within its key freight sectors. This falls in line with the government's strategic vision for 2030, which will aim to promote trade in the region and stimulate economic growth. The measures will contribute to steady growth across its freight modes over the medium term to 2020, with the road transport sector in particular benefitting from infrastructure investment and industry diversification in the country.

Real growth in GDP looks set to slow marginally in 2016, though oil prices are starting to recover slightly from recent drops. Healthy growth in the non-oil sector will have a positive impact on freight transport as demand from other...

Information Technology

Bahrain Information Technology

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BMI View: The decline in the oil price has dampened the economic outlook for Bahrain since the last IT market update, reflected in our downward revision of our forecast to a CAGR of 4.9% 2016-2019 to a total value of BHD154mn. The impact will not however be far reaching under our core scenario, with Bahrain's status as a lucrative retail hardware market largely unaffected, and we maintain our view that premium device spending will provide high margin unit growth opportunities over the medium term. Meanwhile, in terms of enterprise spending growing demand from the financial services and telecommunications verticals, particularly for cloud computing and advanced solutions will offset the cutbacks in the oil and gas sector. There is however heightened downside risk in the 2016 update, primarily through the potential for public sector IT spending...

Infrastructure

Bahrain Infrastructure

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BMI View : Bahrain saw an uptick in construction over late 2014 and growth for the year came in higher than forecast, at a robust 7.3%. Growth prospects for 2015 and 2016 are more subdued, as government spending comes under increasing pressure from falling global oil prices and private investor interest remains hampered by ongoing political insecurity. The key focus remains on residential construction as Bahrain addresses the shortfall in social housing capacity, as well as transport infrastructure, particularly connections with neighbouring Saudi Arabia. These developments remain heavily reliant on external funding and as the GCC investment programme slows we expect growth in Bahrain's construction sector to...

Insurance

Bahrain Insurance

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BMI View: Despite headwinds from general economic weakness triggered by low oil prices, Bahrain's resilient insurance sector will continue to grow at 6-7% in both the life and the non-life sector. Well-developed by regional standards, the insurance market remains small by global standards. Health insurance is likely to be the key outperformer, with growth of 9-10% for the foreseeable future driven by key regulatory changes mandating health cover for expatriates as well as Bahrainis.

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Headline Insurance Forecasts (Bahrain 2012-2019)
Indicator 2012 2013

Medical Devices

Bahrain Medical Devices

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BM I View: Bahrain is a small but technologically advanced market, which ranks sixteenth in the Middle East & Africa (MEA) region. The market will continue to rely on imported medical devices. Population growth, a changing epidemiological profile, increasing health expenditure and healthcare infrastructure developments are factors contributing to market growth despite mounting fiscal pressures due to lower oil prices.

Projected Medical Device Market 2014-2019
Total (USDmn) Per Capita (USD) ...

Metals

Bahrain Metals

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BMI View: Bahrain's metals sector will be given a significant boost over the coming years by plans to greatly increase the country's current aluminium output. While domestic consumption is expected to keep pace with this production growth, we also expect the country to develop into a major aluminium exporter to Saudi Arabia and other countries in the surrounding region.

The metals industry in Bahrain centres on aluminium. Though some way behind the leader UAE, Bahrain the second largest producer in the Middle East, with an annual production of about 1mn tonnes (mnt) positioning it among the ten largest producers worldwide. About half of this output is consumed domestically with the remaining roughly half a million tonnes a year exported...

Oil & Gas

Bahrain Oil & Gas

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BMI View: Despite limited success in boosting oil and gas production from the Bahrain field, the key development for the country will be the refining capacity expansion at the kingdom's centrepiece Sitra refinery. However, delays to the expansion will result in a continuation of fuel export declines and a widening of the country's fiscal deficit until 2020. This marks a two-year delay to our previous forecast which saw increasing fuel exports from 2018.

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Pharmaceuticals & Healthcare

Bahrain Pharmaceuticals & Healthcare

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BMI View: Bahrain's healthcare sector will become increasingly privatised following the exclusion of expatriates from the public health system and the eventual implementation of compulsory health insurance. Public spending will also grow, albeit at a slower pace, with Bahrain's fiscal vulnerability and the wider GCC drug price cuts forming the risks to our outlook.

Headline Expenditure Projections

  • Pharmaceuticals: BHD122mn (USD324mn) in 2014 to BHD131mn (USD347mn) in 2015; +7.2% in both local currency and US dollar terms. Forecast unchanged from last quarter.

  • Healthcare: BHD585mn (USD1.55bn) in 2014 to BHD635mn (USD1.68bn) in 2015; +8.5% in both local currency and US...

Real Estate

Bahrain Real Estate

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BMI View : The country's economic dependence on the hydrocarbon sector has created challenges for Bahrain's commercial real estate sector, considering the precipitous drop in commodity prices. However, we expect rental rates to remain fairly stable for 2016 across each of the sub-sectors we cover, as demand for retail and office space rises.

Bahrain is a small island nation with a population of just over 1mn. The Gulf state is regarded as one of the most prosperous Middle Eastern countries, with an increasingly affluent population, a successful financial sector and improved economic diversity as a result of governmental structural reforms. However, the hydrocarbons industry remains important to the economy, with most of that sector in Bahrain now involved in refining and other areas, as Bahrain now produces only about 48,000 barrels per day. Bahrain thus...

Retail

Bahrain Retail

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BMI View: The Bahrain retail industry is one of the most prosperous in the world, boosted by an affluent and urban population (which is expected to grow in size due to an increased number of expats) and an increase in the level of income on the back of economic growth. Shopping centres are common in the capital of Manama, and the population is familiar with modern retail formats and informed on international brands. More shopping complexes are expected to be built in the future to support the growing demand. The food and drinks sector is less mature and has much room to grow, and retailers have a chance to establish themselves in this growing sector.

Bahrain's economy is expected to increase at a strong rate and reach USD45bn by 2019, seeing an increase of USD10bn from its level in 2015. Though the increase is impressive, it is not, in absolute terms, in the same league with some of its...

Shipping

Bahrain Shipping

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We expect Bahrain to continue develop its role as a regional transhipment hub over the remainder of 2015 and into 2016, with strong container and tonnage throughput growth at Bahrian's premier maritime facility, the Khalifa bin Salman Port (KBSP), forecast to continue. However, growth rates are forecast to slow: from 18.2% to 11.6% for box throughput and from 13.2% to 3.3% for tonnage throughput, with the latter fall attributed to the ongoing slump in oil prices.

Over the medium term, Bahrain's shipping sector will continue to rely on transhipment as a source of growth. We forecast average growth rates of 11.7% for tonnage and 5.1% for container throughput at the port over the next five years, which is a decrease since the uptick after 2011. Slowing growth will be due to limited variety in terms of export goods. However, we do believe that KBSP has a chance to take on the role of a smaller inter-regional rather than...

Telecommunications

Bahrain Telecommunications

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BMI View : Competition in Bahrain's mobile and wireline telecoms market is healthy as it shows measurable benefits for users and still generates the second most attractive returns for operators in the MENA region. Mobile prices in Bahrain have declined by up to 55% between 2010 and 2015, according to a study released by Bahrain's Telecommunications Regulatory Authority (TRA) in December 2015.

The retail price benchmark study revealed that fixed broadband prices in the country saw a decline of up to 85% in the reported period. The price of residential ADSL broadband with speeds of up to 10Mbps decreased to BHD20 (USD53) in 2015 from BHD80 (USD212) in 2010, while data allowance increased from 50GB in 2010 to 150GB in 2015. The report noted that users in Bahrain have...

Water

Bahrain Water

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BMI View:  Overall little has changed in the Bahrain water sector; however, we have upgraded our forecasts following the release of new historical data. We anticipate that the need for greater water security and more efficient distribution infrastructure will continue to be the key issues facing the water services sector, yet the subdued project pipeline and the difficulties in obtaining financing will offer minimal opportunities for water infrastructure groups.

The privatisation of the water sector has been on the agenda in Bahrain for several years. This privatisation takes place in the context of an improvement of the overall investment climate in Bahrain, with domestic economic conditions gradually showing signs of improvement after little growth in the last two years. The country's Electricity and Water ministry is actively seeking bilateral partnerships with counties including France and...

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