Many Bahrain businesses will only start to feel the real economic impact of unrest in the country in May, according to a leading economist and businessman.
Bahrain’s trading system works on a 90-day credit system, where businesses buy and sell on credit, said Dr Yousef Mashal.
As a result, the full impact of the economic downturn that began last month will not be felt for another two months, he added.
‘There will be an income this month (March) from the business that was done three months ago, but next month’s (April) income might be lower because people will try to collect and hold onto money rather than pay,’ he said.
‘In May, the income will come from February and the records have reported there is no business.
‘There is a huge deficit in hotels, restaurants and malls, services aren’t making any business and this means suppliers aren’t making any business, so we will feel the effect very, very much towards the end of April, beginning of May.
‘If the downturn continues this month (March), it will get worse and worse.’
Dr Mashal said Bahrain had lost several major events in February and March that would have been a boost to Bahrain’s economy, including Gulf Air Bahrain Grand Prix, Cisco Networkers Conference, MEED’s Middle East Project Finance 2011 and Spring of Culture.
‘These are four events that would have made all of our services in Bahrain fully occupied and made an impact on Bahrain’s economy and given liquidity to our trading houses,’ said the Mashal Group chief executive director.
‘Unfortunately, this hasn’t happened and in addition the normal consumer buying is less and this will dry up the liquidity in the hand of trading houses and services.
‘Because of this political tension the market performance as a whole has gone down and this will cause problems in two to three months.’
Dr Mashal said the effect of Bahrain’s economic downturn meant that some services and trading houses won’t be able to pay rents, salaries, utilities, bank loans and overdrafts.
As a result, some businesses, particularly smaller ones, may even have to close shop and this means jobs will be lost, he said.
Dr Mashal said the economic downturn due to unrest in the country could extend further to the financial markets.
He said there had already been signs of this shown by Standard & Poor’s move to lower Bahrain’s long and short-term sovereign ratings one notch to A-/A-2.
‘This change in the rating will lower the credibility of our financial system and as a country to be able to take loans and to have our banks deal with larger banks outside,’ he told our sister newspaper Gulf Daily News (GDN).
‘A lot of things could happen and could downsize the economy in Bahrain.’
Dr Mashal said Foreign Direct Investment (FDI) was at its lowest and although political unrest had never been a consideration, this was obviously now being taken into account.
Bahrain would now need to work very hard to regain the trust of these investors, he added.
The only reassurance to the public and international market at this time was a note from the Central Bank of Bahrain that the country was still strong and a regional financial hub that was home to $10 billion (BD3.78 billion) in mutual funds, said Dr Mashal.
‘They may think that sitting on the roundabout is just a political thing, but this is having real consequences to the economy,’ he said.
‘If the country continues this way it will die economically and if this happens the country won’t stand again because there is an economic crisis worldwide, it’s not the same as in the 80s, 90s, 2000s, we are not in a boom time.
‘Putting all this on top of a very small country like Bahrain will destroy what was built over the last 10 years and it is starting.
‘The FDI is down, the Consumer Index is down and everything is down and it’s affecting the economy and will affect every single person in Bahrain.
‘So where will you get a better job and salary? They won’t even have jobs, let alone jobs with a better salary and the government will also have less money to put in the budget.’