Country Report Bahrain April 2011

Outlook for 2011-15: External sector

Bahrain relies on adding value to raw material imports, and exports refined hydrocarbons products and aluminium. Oil prices are forecast to rise in 2011, because of renewed growth in demand for hydrocarbons, which will support the current account; but because Bahrain imports crude from Saudi Arabia (oil imports are roughly half of the import bill), higher prices do not necessarily improve the trade balance. A weaker euro:dollar exchange rate over the forecast period will help to keep the costs of other imports down but may prompt more purchases from abroad, cutting into the trade surplus. (Imports from France and Germany accounted for nearly 15% of total imports in 2009.) We expect the current account to register an average deficit of 6% over the forecast period, as income from services suffers because of the unrest. The income account will remain in deficit, as profit repatriation and debt interest payments outweigh dividends from foreign assets.

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