New Country Reports market report from Business Monitor International: "Bahrain Business Forecast Report Q2 2013"

Boston, MA -- (SBWire) -- 06/18/2013 --Core Views

Elevated oil prices, a ramp up in government spending, and financial support from Saudi Arabia should help bolster growth in 2013. That said, a return to pre-crisis rates of real GDP growth above 7% remain off the cards in the near term.

In light of record oil revenues, we expect government consumption to outperform over the coming quarters, which should support activity in the non-hydrocarbon economy. Efforts to address the shortage of affordable housing will see government CAPEX accelerate.

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.

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The economy's medium-term outlook remains contingent upon a lasting solution being found to the current political crisis. Unfortunately, we maintain our relatively guarded outlook on the prospects that the government and opposition can come to some form of agreement in the near term, despite efforts at reconciliation in February 2013.

Major Forecast Revisions

We have revised up our forecasts for real GDP growth, and now project the economy expanding by 3.5% and 3.9% in 2013 and 2014 respectively.

Key Risks To Outlook

A more pronounced regional crisis stemming from an uptick in tensions between Iran and the West could see risk premiums spike higher, particularly for Bahrain.

A marked drop in oil prices concomitant with a slowdown in growth in Europe, the US and China would pose a significant risk to the country's near-term growth outlook, and likely lead to a marked deterioration to the country's balance of payments and fiscal dynamics.

In terms of the latter, Bahrain's breakeven oil price is now between US$115-120/bbl, which is by far the highest in the Gulf.

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