Bahrain: peg to stay intact, but austerity to be stepped up

Reports that Bahrain’s government has requested financial support from its Gulf neighbours has raised fresh questions over the sustainability of the country’s dollar peg. We expect this financing to be forthcoming, but in return the authorities will be forced to implement more fiscal austerity. This is a key reason why we expect economic growth to be weaker than most anticipate in the coming years.

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