A SUPPLEMENT TO EUROMONEY/MARCH 1998: BAHRAIN
There is renewed conviction in Bahrain that it can hold on to its position as the Gulf's main financial centre, after a long period in which offshore banks based in the emirate were questioning their raison d'être. Domestic institutions were constrained by its relatively small economy and some foreign banks were tempted to move their regional headquarters to neighbouring Dubai. Now, the emirate's strictly regulated market once again appears attractive at a time of international political and financial instability.
Even so, the coming months will be challenging for Bahrain's bankers. On the positive side, the emirate's economy is in better shape than it has been for some years. Bahrain has low inflation, economic growth of 3.5% and a structural budget deficit that is increasingly under control. This year economic growth is expected to rise to 4% as work continues on government power and desalination projects.
"The economy did much better in 1997 as can be seen from the increase in corporate, consumer, government and construction business," says Murad Ali Murad, general manager and chief executive of the Bank of Bahrain and Kuwait.