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

  • The slump in oil prices presents a challenge to Bahrain's growth outlook, with the government under pressure to cut spending over the coming years. That said, we expect development funds from the Gulf Cooperation Council (GCC) to support construction activity, while strong consumption in Saudi Arabia will feed into Bahrain's tourism sector. We forecast real economic growth to slow to 3.4% this year and 3.3% in 2016.

  • 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...

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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 social unrest and terrorist threats to its sophisticated and wealthy infrastructures. For these...

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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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BMI View: Anti-government protests and low-scale terrorist attacks are now a frequent occurrence, as Bahrain's image of stability has been shaken by the political upheaval that began in February 2011. While attacks have not specifically targeted foreigners, the climate of insecurity serves as a deterrent to investment. Cyber crime is also a concern for businesses, given the lack of a clear prevention strategy from the government. Nevertheless, Bahrain continues to offer some advantages, as the crime rate is generally low and financial regulations are comprehensive and well-developed. In addition, the backing of powerful allies including the US, the UK and Saudi Arabia means that the country is unlikely to face an external attack or...

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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 second place regionally with a score of 66.6 out of 100. Although the government is keen to...

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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 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....

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Bahrain Industry Coverage (16)

Autos

Bahrain Autos

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This quarter, BMI maintains its view that new vehicle sales growth will slow over 2015. We continue to target a still-healthy 6.5% sales 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, it is clear that Bahrain's growth outlook has weakened since the end of last year. The retrenchment in global oil prices is putting substantial pressure on the state finances - and by implication the system of public spending underpinning the non-oil economy. Throughout the remainder of 2015 and into 2016, private sector activity will suffer from further erosion in consumer and business confidence, already weakened by the persistent uncertainty of Bahrain's political environment. That said, the impact of the oil price...

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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, however we believe this will have little impact on the economy and consumer spending habits per capita as GDP is expected to grow at the rate of 3.7% on average until the end of our forecast in 2019.

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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...

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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 our forecast period to 2019. We forecast food consumption growth in local currency terms of 5.7%, down from 6.6% in 2014, supported by strong growth in the mass grocery retail (MGR) sector. Real GDP growth is forecast to reach 3.4% in 2015 and 3.3% in 2016. However, employment and...

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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: Bahrain's insurance sector faces a challenging period as the knock-on effects of low oil prices on the country's hydrocarbons sector and wider economy result in households and businesses adopting more cautious approach over the coming years. As such, we expect both life and non-life insurance penetration to remain fixed at their current, relatively low rate through to 2019. That said, we see opportunities emerging in a number of sub-sectors through this period, not least health insurance.

Having bounced back strongly from the Arab Spring episode of early 2011, Bahrain's insurance sector has enjoyed substantial growth in recent years, with growth in underwriting activity supported by a combination of robust economic expansion and a growing expatriate population. That said, penetration (including both the life and the non-life segments, is relatively low at...

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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...

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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. Other plans envisage the...

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Pharmaceuticals & Healthcare

Bahrain Pharmaceuticals & Healthcare

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BMI View: We believe Bahrain's pharmaceutical market outlook will continue its rapid growth over our forecast period. Although small, a growing and aging population and will drive long-term medicine demand in the country along with an increasing chronic disease burden. However, medicine price caps, a fall in oil prices and ongoing political tensions work against the markets attractiveness to multinational drugmakers.

Headline Expenditure Projections

  • Pharmaceuticals: BHD114mn (USD302mn) in 2014 to BHD122mn (USD323mn) in 2015; +7.2% in both local currency and US dollar terms. Forecast in line with last quarter.

  • Healthcare: BHD591mn (USD1.57bn) in 2014 to BHD641mn (USD1.70bn) in 2015...

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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: The sales in the Bahraini retail sector will continue to grow, encouraging both domestic and regional developers to invest confidently into new retail units. The country's retailers currently benefit mostly from the proximity to the large Saudi market, large household income and the annual Formula-1 race. We forecast that the country's retailers will be exploring new growth opportunities targeting tourists, Saudi clients and wealthy expats.

The sudden drop in oil prices was feared to threaten the Bahraini economy in 2014. While the decline inevitably slowed down the accumulation of the country's financial reserves, Bahrain, as other members of the Gulf Cooperation Council (GCC) proved its resilience against the risks posed by the international economic climate. GCC countries are rapidly becoming increasingly...

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Shipping

Bahrain Shipping

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BMI View: 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 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...

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Telecommunications

Bahrain Telecommunications

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BMI View : With a penetration rate of more than 170% in 2014, BMI believes the greatest growth opportunities in Bahrain's telecoms market lie in the 3G/4G and wireline broadband segments. However, with all operators' networks now covering 100% of the population, they are turning to new services and content to differentiate themselves from their rivals. During 2014, all three mobile operators launched VOD services, and we expect them to forge further partnerships with regional video streaming, gaming and entertainment content providers in order to improve customer loyalty and sustain ARPU levels. Meanwhile, operators are also expanding their range of enterprise solutions to include advanced communications, cloud computing and M2M solutions. Batelco has been at the forefront of this trend, but we...

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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 and...

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