BAHRAIN

RISK RATING
Moderate
Default High Risk Score 2.60
Normal Average 1.82
Weighted Average 1.66
RISK RATING HISTORY
RISK RATING SCALE

Risk Rating Scale

Severe: 8.0 to 10
High: 6.0 to 7.9
Elevated: 4.0 to 5.9
Moderate: 2.0 to 3.9
Low: 0.0 to 1.9
EXCHANGE RATE
Country Outlook

The Kingdom of Bahrain remains dependent on Saudi Arabian military and diplomatic support to ensure its stability and to avoid more protests of its Shia majority population against the Sunni monarchy. Saudi Arabia is likely to have signed off on Bahrain’s normalisation of relations with Israel in 2020, which drew outrage from Bahrainis at home and abroad. The country’s oil and gas dependent economy took a heavy hit in 2020, although a recovery is expected in 2021. In response, the government is pushing ahead with an economic diversification agenda, while the banking and financial sector remains strong and more resilient. Low labour costs are also boosting prospects for manufacturing, aluminium production, and logistics, while trade with Saudi Arabia is a key driver for growth.

  • The Al-Khalifa monarchy, which is headed by King Shaikh Hamad bin Isa Al Khalifa, remains firmly in control of Bahrain’s military, judiciary, and political system. Crown Prince Salman, prime minister since 2020, runs the government’s administration in preparation for a succession. The main challenge to the Sunni monarchy’s authority is derived from leading Shia Muslim leader Isa Qassim, who lives in Iran. Dissolved Bahraini opposition party al-Wefaq, a group close to Qassim, condemned Bahrain’s normalisation of ties with Israel in 2020 and has called for protests. However, Saudi military and diplomatic support for Bahrain’s monarchy indicates that Shia protests are unlikely to return in large numbers or frequency. Scores of activists have had their citizenship revoked. Meanwhile, liberal and Islamist opposition groups have little chance of implementing meaningful democratic reform.
  • Bahrain’s security and stability are underpinned by alliances with the United States and Saudi Arabia. The kingdom has provided the US a base in Juffair since the early 1990s, which hosts the US Fifth Fleet and some 6,000 American military personnel. There is also a UK naval presence through its base at Mina Salman. The country’s most valuable alliance lies with neighbouring Saudi Arabia, which ensures military protection from Iran and rapid deployment in case of Shia protests. Bahrain participates in the Saudi Arabian-led intervention in Yemen against the Shia Houthis, which has deteriorated relations with Iran. Its participation in the Yemen war and crackdown on protesters at home has tarnished Bahrain’s human rights credentials among some activist groups.
  • Economic diversification efforts away from oil and gas are dependent on the banking and financial sector, as well as regional trade through low-cost manufacturing, aluminium production, and logistics. Financial support from Saudi Arabia, the UAE, and Kuwait is also aimed at relieving pressure on the kingdom in currency and debt markets, even before the pandemic. Bahrain’s fiscal position is tied to this financial aid, which is aimed at alleviating near-term financing constraints. However, the country’s public debt is rising fast, as Bahrain borrows more to counter falling revenues from the energy sector and the non-oil sector, which has been impacted by slowdowns in the retail, hospitality, and financial services sectors. The IMF is calling for a corporate income tax to boost government revenues.
CUMULATIVE AND DAILY COVID-19 INFECTIONS AND DEATH RATE
INTERNATIONAL MONETARY FUND | DATAMAPPER
Risk Perils
Political Instability
1.5
Expropriation, Nationalisation, Confiscation & Deprivation
1.5
Contract Frustration & Breach
1.5
Taxation
2.0
Bribery & Corruption
2.0
Regulatory Burden
2.0
Strikes, Riots & Civil Commotion
2.3
Security
1.0
Sovereign Default
1.8
Economic Volatiliy
2.6

Risk Rating Scale (small)

Severe
High
Elevated
Moderate
Low

Risk Score BTN

SECURITY MONITOR

ACLED DASHBOARD

MEDIA MONITOR

View Media Monitor BTN

RELATED ARTICLES