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

  • Development funds from the GCC and visitor flows from Saudi Arabia will support Bahraini economic activity over 2015. Nevertheless, the slide in oil prices will weigh down on consumer and business confidence, and prompt a moderation in the government's spending plans. We forecast real economic growth to slow to 3.4% this year, from 5.3% in 2013.

  • 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...

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Bahrain Operational Risk Coverage (8)

Bahrain Operational Risk

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BMI View: Bahrain demonstrates few risks with regards to its utilities provision and costs, boasting the third-best availability of electricity, fuel, telecommunications and water in the world. Similarly, it boasts one of the lightest regulatory systems globally with regards to labour costs and taxation. These factors dramatically reduce overheads and costs for businesses. However, investors in Bahrain face risks from the quality of labour available due to poor educational standards, as well as significant barriers to trade in the form of customs tariffs and delays. Lastly, the major risk to Bahrain comes in the form of terrorist threats to its sophisticated and wealthy infrastructures. For these reasons, Bahrain receives an overall Operational Risk score of 58.4, placing it 60...

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Bahrain Operational Risk

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BMI View: Despite the constraints imposed by its small population (totalling only 1.2mn, including expatriate workers), Bahrain offers attractive opportunities to foreign investors. Bahrain's favourable business conditions and strong economic fundamentals offer strong advantages to incoming businesses. We have given Bahrain a score of 62.3 out of 100 in BMI's Trade and Investment Risk Index. This places the Kingdom in fourth position in the Middle East and North Africa (MENA) region, out of the 19 countries covered - behind the UAE, Qatar and Saudi Arabia. Globally, Bahrain comes in above ...

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Bahrain Crime & Security

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Bahrain is generally a safe place for foreign business travellers, expatriate workers, and tourists, but the country's image of stability has been shaken by the political upheaval that began in February 2011. Anti-government protests are now a frequent occurrence, and while these are not targeted at foreigners, they could serve as a deterrent to investment. Meanwhile, there is also a risk that foreign visitors could fall victim to a terrorist attack, even if they are not the intended target. Certainly, the political unrest has been highly disruptive to business activity, given that protests have taken place in the heart of the capital Manama, which is a very compact city. Overall, Bahrain scores 47.2 out of 100 for Crime and Security Risk, placing the country sixth out of 19 countries in the Middle East and North Africa (MENA) region.

Moreover, given the vast gap between the wishes of the Sunni elite and the demands of the Shi&#39...

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Bahrain Labour Market

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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 58.5 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 second place regionally with a score of 66.6 out of 100. Although the government is keen to reduce the country's dependence on foreign workers and improve employment opportunities among...

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Bahrain Logistics

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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 Kingdom 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 diversification options. In light of this, Bahrain scores 65.8 out of 100 in BMI's Logistics Risk Index and ranks third out of 19 countries in the Middle East and North Africa (MENA) region, behind the UAE and Israel.

The utilities sector is well developed, with the country...

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Bahrain Industry Coverage (16)

Autos

Bahrain Autos

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BMI expects a slowdown in new vehicle sales in Bahrain over 2015. We are targeting a still healthy 6.5% growth for the current year, down from the very strong estimated 14% growth seen over 2014. A deteriorating macroeconomic picture is the main reason behind our expectation for lower new car sales growth in 2015. As one of the MENA countries most exposed to lower oil prices, we believe that Bahrain will struggle to balance its deteriorating state finances with the economy's reliance on government expenditure. Financial assistance from the rest of the Gulf will support the government's infrastructure investment plans for the time being and should alleviate the need for a major adjustment in public spending. This should also indicate continued strong demand for HCVs and construction equipment.

The tourism industry, a bulwark of employment, will also benefit from Bahrain's links with Saudi Arabia...

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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

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Consumer Electronics

Bahrain Consumer Electronics

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BMI View: Bahrain is susceptible to falling oil prices, with the government and private businesses expected to rein in spending if the low prices persists for a considerable period. This would weigh on demand for consumer electronics products, particularly those in the mass market segment as we expect low- to mid-income consumers to be hardest hit by spending cuts.

Headline Expenditure Projections

  • Computer Sales: The market will increase from USD205mn in 2014 to USD212mn in 2015. We expect that tablets and notebook hybrids will dominate the consumer market in 2015, although tablet growth will slow from recent years due to saturation.

  • AV Sales: The market will contract from USD245mn in 2014 to USD239mn in 2015. The market is expected...

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Food & Drink

Bahrain Food & Drink

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BMI View: Despite some downside risks, we maintain our positive outlook on food consumption growth in Bahrain throughout the forecast period. We forecast food consumption growth in local currency terms reaching 5.7%, down from 6.6% in 2014, supported as it is by strong growth in the mass grocery retail sector. Real GDP growth is forecast to reach 3.8% in 2015 and 2016. However, employment and wage growth have slowed in recent months and are yet to show signs of improvement.

Headline Industry Data (local currency)

  • Food consumption growth for 2015: +5.7%; compound...

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Freight Transport

Bahrain Freight Transport

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Bahrain continues to invest heavily to establish itself a key logistics centre in the Gulf. The primary port, the Khalifa Bin Salman Port (KBSP) is to have its channel deepened, and the Bahrain International Airport is to be expanded. We question whether the small island state can compete with the investment that has already been put into making Dubai a logistics hub for the region; however, Bahrain has succeeded in attracting new logistics companies to its territory in recent years, and we forecast growth across its freight modes over our medium-term forecast period.

Headline Industry Data

  • Growth at the port of Khalifa bin Salman (KBSP) in terms of total tonnage throughput is forecast at 13.1% in 2015, with average annual growth forecast at 10.6% between 2015 and 2019.

  • Growth in Bahrain International Airport tonnage handling forecast at 2.8% in 2015...

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Information Technology

Bahrain Information Technology

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BMI View:   Growth in 2014   was squeezed by the political instability that has been an undercurrent in Bahrain since the Arab Spring, and we believe it could continue to be a drag on growth in 2015, with downside risk should the situation deteriorate. However, there are positive characteristics that should result in medium term growth in IT market spending. Favourable population dynamics, investments in retail and data network infrastructure, government ICT initiatives and the country's expanding financial hub status are expected to be major drivers of growth in Bahrain's IT market. We also point to significant opportunities in the...

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Infrastructure

Bahrain Infrastructure

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BMI View : We forecast that up to 2018, real growth in Bahrain's construction industry will average 3.6%, buoyed by government investment in infrastructure and social housing. While this is an improved outlook on a year ago, there is no end in sight to Bahrain's protracted political crisis and we see little chance of a rapid construction industry recovery. Persistent political uncertainty will likely see private sector investment into new projects remain weak when there are more attractive opportunities elsewhere in the Gulf region.

Key developments in the...

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Insurance

Bahrain Insurance

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BMI View: We think that total insurance premiums will rise broadly in line with nominal GDP in Bahrain in 2015-2019. Strong growth in health insurance premiums will be offset by challenges elsewhere. Nevertheless, recent developments have been mostly positive. Wildcards can be identified and are generally consistent with a more rapid, rather than a slower, expansion in premiums through the forecast period.

Over the forecast period, total insurance penetration in Bahrain is likely to remain broadly unchanged at 2.1% of GDP. In essence, premiums appear set to rise broadly in line with nominal GDP over the period to 2019. The lack of growth in penetration - and moderate rise in density - from levels that are fairly low by global norms highlights that sector faces a number of challenges. Total premiums appear set to rise from USD780mn in 2015 to USD1,010mn in 2019.

In the...

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Metals

Bahrain Metals

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BMI View: Bahrain will become a major aluminium exporter in the coming years as Aluminium Bahrain expands output significantly. Consumption growth will increase given substantial investment plans but still be unable to keep pace with output.

We expect Bahrain to become a major exporter of aluminium in the Gulf region over the coming years. Aluminium Bahrain's significant expansion plans will push output to 1.4mnt in 2018, from 900kt in 2013. Consumption growth will push significantly higher as the government and private sector embark of an infrastructure building programme. Overall, however, we expect Bahrain's surplus of aluminium to grow from 410kt in 2013 to 725kt in 2018. We expect this excess capacity to be exporter to Saudi Arabia and the United Arab Emirates, both of which will experience a...

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Oil & Gas

Bahrain Oil & Gas

Pharmaceuticals & Healthcare

Bahrain Pharmaceuticals & Healthcare

Real Estate

Bahrain Real Estate

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BMI View: Bahrain's commercial real estate sector is witnessing stagnant growth as a dip in economic output, political instability and an overhanging supply of commercial space combine to keep rental rates down. The country has a number of large-scale commercial projects under development, including the flagship Bahrain Bay project.

A dip in economic growth over 2014 saw rental rates stagnate across much of Bahrain's commercial real estate landscape. Falling oil revenues, a contributor to overall GDP, fell as a result of declining crude prices globally, while other sectors, such as manufacturing failed to pick up the slack by showing only moderate growth.

In the office sector the market continued to feel the lingering effects of the global financial crisis, with high vacancy rates...

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Retail

Bahrain Retail

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BMI View: Despite being the smallest country in the Gulf Cooperation Council (GCC) by the size of its area, population and economy, Bahrain retains its potential in the retail sector. Bahrainis are among the most affluent people in the world and the country benefits from its close relations to Saudi Arabia. Similar to Qatar and Kuwait, Bahrain has not yet been tremendously affected by the slump in oil prices as the economy diversifies with the growth of construction, hospitality and upscale retail sectors.

Unemployment in Bahrain remains relatively high, the ruling al-Khalifa family holds a tight grip on the country's resources and the nation remains divided over Bahrain's governance. Compared to the United Arab Emirates, Qatar or Saudi Arabia...

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Shipping

Bahrain Shipping

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The outlook for Bahrain's shipping sector as a whole is tied to that of its premier maritime facility, the Khalifa bin Salman port. In 2015 the port, and so the industry as a whole, is set to post solid growth as it recovers from the contractions in volumes recorded in 2013. Container throughput at the facility is rising as a result of the massive hike in demand at Saudi Arabian ports.

This is a trend we expect to continue over the medium term where Bahrain will continue to develop its role as a regional transhipment hub. In part, this expectation is down to our trade outlook for the country. With exports forecast to grow by a mere 1.9% in 2015, and to continue at a similar pace to 2024, we do not see any significant source of export growth until the planned additions to aluminium and refined oil production capacity come online towards the end of the decade. As a result, the shipping sector must rely on transhipment as an avenue for...

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Telecommunications

Bahrain Telecommunications

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BMI View : There remains some growth potential Bahrain's mobile market, but the key opportunities in the country's telecoms market now lie in the advanced mobile and wireline data market, such as LTE and fibre services. Operators will need to start focusing on increasing postpaid penetration through the introduction of services which drives usage and bring further revenue. Operators should also be looking at the enterprise segment to diversify from an increasingly competitive consumer market.. The outlook, supported by healthy GDP and private consumption growth forecasts to 2019, is...

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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...

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