Bahrain’s economy has struggled since the start of protests earlier this year. Capital is fleeing the country, with many companies halting their business operations in Bahrain.
While much of the world suffered through global recession, Bahrain’s economy was considered strong prior to the unrest earlier this year. Despite lagging oil production, the government had moved to bolster its position by diversifying its investments, building the country’s heavy industry and tourism sectors and investing in Western ventures. Bahrain’s Islamic financial sector is one of the strongest in the region. A 2005 free trade agreement between Bahrain and the US further contributed to Bahrain’s rapid growth, which outpaced many of its neighbors.
Bahrain had recently taken steps to privatize government sectors like transport, telecommunications, and financial services, in an unprecedented move among Gulf states. When the 2008 world financial crisis struck, the government took swift measures that affected the entire financial sector, in the hope of preventing Bahrain from slipping into the world recession. The economy’s fundamentals were sound enough to ensure growth of an estimated four percent throughout 2009.
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