Outlook for 2011-15

• Political unrest in Bahrain will continue as the king, Hamad bin Isa al-Khalifa, has decided to clamp down on protesters calling for political and social reform. Elections planned for 2014 are now unlikely to take place.
• Existing tensions over perceived discrimination against Bahrain's majority Shia Muslim community will be exacerbated by the recent unrest, with the marginalised Shias now even less likely to engage with state institutions.
• Fiscal revenue will be dominated by oil income. We expect the government to run deficits in 2012-15 as high subsidies and capital spending are used to address the economic demands of Bahrainis.
• Bahrain will continue to participate in the development of a Gulf monetary union, but we do not expect a single currency for several years. The Central Bank of Bahrain will keep the dinar pegged to the dollar in the meantime.
• We expect real GDP to grow by 3.8% over the forecast period as services, particularly those provided by the financial sector, perform poorly in light of the political and social unrest.
• The current-account deficit will widen in 2011 because of lower services exports and higher costs for non-oil commodities and industrial materials. We expect the deficit to average 6% in 2011-15.

Monthly review

• Political tensions have increased since the king called in troops from neighbouring Gulf Co-operation Council states to quell protests and return stability to Bahrain.
• Following the announcement of a three-month state of emergency, several opposition leaders have been arrested or detained by the security services.
• The death of at least four activists in custody has lent substance to rumours of suspected torture in Bahrain. The government has denied the use of torture, saying detainees died because of pre-existing medical problems.
• One of the king's younger sons, Nasser, has gained in prominence in recent weeks, appearing with security officials and heading a new military unit.
• Public-sector companies and institutions have fired hundreds of staff that participated or are believed to have participated in protests and strikes.
• Hotel occupancy rates were reportedly very low in March and April, and the opening of some new hotels has been delayed, as a result of the recent political instability.
• Total employment in Bahrain grew by 5.2% year on year and 4% quarter on quarter in the fourth quarter of 2010.