Macroeconomic Forecast Bahrain

Consumer price inflation in Bahrain came in at a three-month low of 0.2% y-o-y in December, bringing the average rate of headline price growth in 2011 to -0.4%. A key factor behind the subdued inflationary outlook has been ongoing declines in the real estate market, with prices within the 'housing' component of the consumer price basket contracting 18.6% y-o-y in December. Although inflation will tick higher in 2012, not least because of low base effects, we expect headline CPI to remain in the low-single digits, and are forecasting an average rate of 1.7% over the year.

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