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

  • In light of record oil revenues and the weakness of private investment, we expect public spending 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.

  • We do not believe that weaker oil prices will derail the Bahraini government's investment plans, ensuring a continued source of support for the country's economy. Real GDP growth will reach 3.8% in 2015 and 2016, compared to an annual average of 3.6% between 2009 and 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-...

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Bahrain Operational Risk Coverage (8)

Bahrain Operational Risk

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We have given Bahrain a score of 61.6 out of 100 in our Trade and Investment Risk Index. This places the Kingdom in third position in the Middle East and North Africa (MENA) region, out of the 18 countries covered - behind only the UAE and Qatar. Globally, Bahrain comes in above Barbados and Macedonia, but falls below Italy and Japan. Despite the constraints imposed by its small population (totalling only 1.2mn, including expatriate workers), Bahrain offers attractive opportunities to foreign investors.

Bahrain performs relatively well in terms of Economic Openness, for which it scores 51.7 out of 100 and comes in seventh position regionally. The government has a liberal approach to foreign investment, and is home to a large financial services sector. Developing the service economy has been a top priority for the government - given Bahrain's relatively small oil reserves - and the financial services sector has emerged as a major driver of...

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Bahrain Operational Risk

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BMI View: The key risks to businesses entering Bahrain are the potential for disruption due to domestic unrest or region-wide conflict, the lack of a large domestic pool of skilled labour (necessitating the costly importation of skilled foreign workers), an overreliance on roads and gas with little in the way of alternative transportation or utilities options, and limited liquidity in the financial markets. However, there are numerous benefits available for investors entering the country, such as the lack of personal and corporate taxation, low levels of crime, low labour costs, and a liberal approach to foreign investment. Due to the predominantly low risks facing incoming businesses, we have awarded Bahrain...

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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 48.8 out of 100 for Crime and Security Risk, placing the country sixth out of 18 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'a majority, who...

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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 58.3 out of 100, placing the country fifth out of 18 states in the Middle East and North Africa (MENA) region, between the UAE 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 67.8. Although the government is keen to reduce the country's dependence on foreign workers and improve employment opportunities among Bahraini nationals, labour...

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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 overreliant on road 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 66.0 out of 100 in BMI's Logistics Risk Index and ranks third out of 18 countries in the Middle East and North Africa (MENA) region, behind the UAE and Israel.

The utilities sector is well developed, with the country's oil and gas wealth decreasing the...

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Bahrain Industry Coverage (16)

Autos

Bahrain Autos

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New vehicle sales remain strong in Bahrain, although they have eased slightly, from 22% annual growth over H114, to 17% annual growth over 8M14. This still takes year-to-date sales to the 42,266 unit mark. For the full-year, BMI is maintaining its view of sales growth in the region of 14.5%, taking full-year new vehicle sales to the 63,300 mark.

Although we believe that passenger cars will continue to account for the lion's share of new vehicle sales within Bahrain, the news in November 2014 that German commercial vehicle manufacturer MAN Truck and Bus has been awarded a contract to supply 127 new buses to Bahrain's Ministry of Transport is a reminder of the opportunities that also exist within Bahrain's commercial vehicle segment.

The contract was awarded to MAN as part of the Kingdom's plan to enhance its public transport network from 2015 onward. As the country already...

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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's consumer electronics market is one of the smallest in the region, reflecting the size of the population. Consequently devices are largely distributed via regional hubs, as it is not cost effective for global vendors to have a local presence. However, despite its small size there are considerable opportunities in Bahrain due to high per capita incomes and the propensity of the local population to purchase consumer electronics equipment. Smartphones and tablets are currently the fastest-growing device categories in the market, although big-ticket items such as LED and 3D TV sets also contribute to the market's expected expansion. While there are many positive aspects to Bahrain's market, it should be noted that continuing civil unrest and an unstable political outlook pose potential downside risks to our forecasts for the sector's growth.

Headline...

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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 falling only slightly from the 6.4% forecast for 2014, supported as it is by strong growth in the mass grocery retail sector. Real GDP growth of 3.4% in 2014 is expected to be exceeded in 2015 and 2016 with growth of above 4% forecast for both years. 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 2014: +6.4%; compound annual growth rate (CAGR) 2013 to 2018: +6.2%.

  • Per capita food...

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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...

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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

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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 construction of a liquefied natural gas receiving terminal, although this is still a long way from realisation.

Headline Forecasts (...

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Pharmaceuticals & Healthcare

Bahrain Pharmaceuticals & Healthcare

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BMI View:  Our outlook for Bahrain's pharmaceutical and healthcare sector remains strong, with the government announcing the development and expansion of health centres across the country in addition to several preventive health projects planned. Despite recent price cuts negatively impacting the market in the short term, we believe an ageing population, increasing chronic disease burden and robust economic growth will drive medicine demand for many years to come.

Headline Expenditure Projections

  • Pharmaceuticals: BHD106mn (USD281mn) in 2013 to BHD115mn (...

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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...

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Retail

Bahrain Retail

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BMI View:  The increasing affluence of the Bahraini consumer, together with growing brand awareness and a forecast rise in real private consumption growth, will lead to increased household spending on the retail sector over our forecast period. This will particularly benefit personal care, communications, clothing & footwear and furnishing & home retailers, although we expect housing & utilities expenditure to remain by far the highest throughout our forecast period.

Forecasts for household spending and headline total spending across each retail subsector between 2015 and 2018 are provided in BMI's Bahrain retail report. Our projections also cover household income and employment, demographic forecasts, and a detailed breakdown of household and per capita spending across a large number of retail areas. These include food & drink,...

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Shipping

Bahrain Shipping

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Bahrain's main maritime facility, the Khalifa bin Salman port, is set to continue posting solid growth figures in 2015, especially in terms of container throughput. Volumes at the facility are rising as a result of the massive hike in demand at Saudi Arabian ports.

Our outlook for the facility is a reflection of our forecasts for the Bahraini shipping industry as a whole. The country's domestic consumer demand outlook bodes well for its ports sector over the medium-term. The port of Mina Salman should see tonnage volumes rise as well, on the back of demand from an extensive housebuilding programme under way in Bahrain.

Headline Industry Data

  • Growth in KBSP total tonnage throughput is forecast at 13.1% in 2015, with average annual growth of 10.6% between 2015 and 2019.

  • Growth in KBSP container throughput is forecast at 7.8% in...

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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...

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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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