Experts have warned that Bahrain and Oman are the most vulnerable among exporters to low oil prices.
A new research note from Bank of America Merrill Lynch said Bahrain was most vulnerable among the 68 economies the bank covers because of its fiscal deficit seen as the largest. The note added that Oman had one of the widest current account gaps.
It further indentified Kuwait as the fundamentally strongest market in the Persian Gulf region. Globally, Bank of America Merrill Lynch said, Russia would be the oil exporter with the best fundamentals.
Last month, figures from Bahrain’s central bank showed the country had been unable to stem the decline in its foreign reserves as lower oil prices strained the smallest economy among other countries in the Persian Gulf region, wrote Arabianbusiness.com in a report.
Net foreign assets dropped 11 percent to BD645.2 million ($1.7 billion) in February.
Overall, they’re down 71 percent from a peak of BD2.24 billion in November 2014, the report quoted data compiled by Bloomberg.
Bahrain, which pegs the dinar to the dollar, has been more vulnerable to slumping oil prices and regional political instability than richer states in the region.
The further drop in foreign reserves comes nearly a month after the International Monetary Fund warned that Bahrain, a close Saudi ally and the home of the US Navy Fifth Fleet, needs to make significant spending cuts to restore stability to its budget and improve investor confidence, the report added.
Bahrain’s government went to domestic and international markets last year to finance the country’s 2016 budget deficit of 1.5 billion dinars. Economic growth is forecast to slow to 2.3 percent this year, the lowest level since 2011, according to data compiled by Bloomberg.