POLITICAL Bahrain’s political environment can look forward to continued stability for the upcoming period. While there are a few minor political issues within the Kingdom, no significant or trivial issues are expected to arise. Bahrain’s foreign relations also remain stable with the Kingdom pursuing several efforts to further strengthen ties with GCC countries as well as European and Asian nations. The only major foreign threat is the potential conflict between the US and Iran. In order to increase job opportunities and to strengthen the Bahraini workforce, the government has undertaken several training initiatives for the Kingdom’s citizens. Making available a higher amount of jobs and housing for the less well-off has become an area that the government is determined to pay more attention to. Indeed in 2009 alone, several activities supporting this initiative were launched. Several more similar initiatives can be expected over the next 12 months. ECONOMICAL In 2009 real GDP growth may slow to a rate of 2.5% as result of the decline in demand for Bahrain’s exports as well as a result of hindered global and regional growth. However, it is believed that the growth rate will recover in 2010. Despite the slight possibility of a decline in growth rate, the current account should stay in surplus for at least the next 12 months. The budget deficit for 2009 is expected to reach 7.6% of GDP in 2009 and to fall to 4.9% in 2010. The falling price of oil has created a need for Bahrain to diversify its revenues, which may be achieved through the use of value-added-taxes (VAT). As well, money supply growth decreased from 20.8%in 2008 to 17% in February of 2009. Despite the decrease Bahrain’s central bank has plans to issue a three year bound worth BD 2540 million in conjunction with a BD 188 sukuk (Islamic security). Furthermore, demand for Bahrain’s exports may slow in 2009 as a result of the global economic turn down and the fall in oil prices. However, even with the falling oil prices and the decreased demand for exports, it is believed that Bahrain can continue to meet these challenges and finance a large deficit without hurting its debt ratios.