Bahrain Economy Set For Further Slump Following Renewed Political Clampdown

On June 14, a court in Bahrain ordered the main opposition party Al Wefaq to be closed and its funds seized, following a request by the Ministry of Justice. The surprise decision is likely to spell further trouble for the Gulf island’s economy.

The country, home to the US Fifth Fleet, used to have a thriving business sector. Indeed, until the rise of Dubai, it was considered the pre-eminent financial hub for the region. Today it is a place that international businesses tend to avoid. In a report on the country issued on June 10, ratings agency Standard & Poor’s said there had been a net outflow of foreign direct investment of 6% of GDP last year and the banking system has shrunk by 25% since 2008.

The economy has been struggling in the low oil price environment that took hold in late 2014 and the country been repeatedly downgraded by the main ratings agencies over the past couple of years, taking it into junk status. With oil revenues sliding, but with high spending commitments to maintain, the government has had to resort to issuing debt and leaning on its richer Gulf neighbours for support.

Sheikh Ali Salman

Even before the latest clampdown, the outlook was already rather bleak. Earlier this month the World Bank cut its forecast for GDP growth this year to 2.2%, compared to the 2.7% it had predicted in January. The economy is set to slow further in the following years, with the World Bank forecasting growth of 2% in 2017 and 1.9% in 2018.

Further repression, and with it the likelihood of further protests, means the country will become even less appealing as a place to do business.

The country’s current political problems date back to 2011, when the region was in the grip of the Arab Spring protest movement. Pro-democracy activists took to the streets of the Bahrain capital Manama, but were forcefully suppressed with the help of troops from Saudi Arabia and the UAE.
Bahrain’s elite is dominated by Sunni families, including the ruling Al Khalifa family, and the government has frequently pointed the finger of blame at Iran for encouraging the Shia majority in the country to protest, although without ever producing much in the way of evidence. Justifying the move to ban Al Wefaq, the government says the party was helping “to create an environment for terrorism, extremism and violence as well as a call for foreign interference in internal national affairs.”

However, it is not simply a sectarian issue, and pro-democracy protesters have been drawn from both Sunni and Shia segments of society.
The closure of Al Wefaq came a day after Bahrain had been the subject of strong criticism from the UN High Commissioner for Human Rights, Zeid Ra’ad al Hussain. Criticising the fact that Bahrain has stripped at least 250 people of citizenship for alleged disloyalty to the state, he said “repression will not eliminate people’s grievances, it will increase them.”

Although the shutdown of Al Wefaq was unexpected, it follows a series of worrying decision by the authorities in recent days. A day earlier, the president of the Bahrain Commission for Human Rights, Nabeel Rajab, was arrested. On May 30, Sheikh Ali Salman, secretary general of Al Wefaq, saw his prison sentence increased from four to nine years.

A day after that, on May 31, the authorities had released prominent human rights activist Zainab al Khawaja from jail. She subsequently fled to Denmark, having been told that she faced the prospect of re-arrest.

The closure of Al Wefaq has set off another round of criticism from human rights groups and Bahrain’s allies alike. The Bahrain Justice and Development Movement said “This move is aimed at criminalising all opposition in Bahrain. It sends a clear signal, that no matter how moderate or compliant with rules an organisation is, if it criticises the government, it is illegal.”

In unusually strong language, a US State Department spokesman said “We are deeply troubled by today’s alarming move… and we urge Bahraini officials to reconsider this decision.” However, it remains unclear how much leverage the US and other Western allies really have on Bahrain and how much pressure they will be willing to put on its government.

Author: Dominic Dudley

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