Concerns over its external financing position combined with a more hardline authoritarian streak threatens to undermine its position as a financial centre and trade hub.
• Economic risk (MEDIUM): The downgrade of its sovereign debt to junk by all three ratings agencies highlights the need for further adjustment to restore fiscal sustainability, threatening its currency peg.
• Political risk (HIGH): Further crackdowns on opposition parties adds to tensions fuelled by the first state executions in seven years. Bahrain may find its neutral stance on the Qatar challenged.
• Financial risk (LOW): Bahrain has enjoyed strong performances in both its equity and fixed income markets but further work should be carried out to support financial stability.
• Commercial risk (LOW): Bahrain is in the top third of countries in the World Bank’s Doing Business Report index and has introduced new laws to reform financial services.