Immediate Effects of Bahrain’s “Arab Spring”

There were several immediate effects of the unrest that has been rocking Bahrain since February:

1) Cancellation of Formula 1.

A major blow to both Bahrain’s economy and prestige, was the cancellation of the 2011 Formula 1 Grand Prix races, originally scheduled for March, due to the unrest. Subsequent efforts to reschedule it for June and then October or November 2011 were unsuccessful. The next Formula 1 event in Bahrain is presently re-scheduled for November 2012. The negative economic effects of this cancellation and rescheduling are significant:

• Formula 1 has been a major contributor to Bahrain’s economy through spending on ticket sales, TV coverage, transport, accommodation, food and beverage, merchandise and souvenirs and other leisure activities; cancellation of it for 2011 involves significant losses to the economy;

• Since 2004, the Grand Prix has been held every annually in March as the major event of the racing season; Bahrain will now lose its premiere position and come near the end of the season, and there will be 32 months between the last F-1 event held in March 2010, and the next one now scheduled for November 2012;

• Bahrain risks losing its title as “The Home of Motorsport in the Middle East.” 

2) Other Cancelled or Postponed Events.

In addition to Formula 1, many other events, sporting and otherwise, werecancelled or postponed due to the unrest. Chief among these is the Golf European Tourney at the Royal Golf Club, which will not be held in Bahrain in 2012. Other cancellations include business meetings, regional and international regional conferences, and tour packages.

3) Travel Bans and Advisories.

In response to the unrest, several countries issued travel bans or advisories during the spring that affected both tourism and scheduled events, reflecting ill on the international and business standing of Bahrain.

4) Direct Loss to the Economy.

Esam Fakhro, chairman of the Bahrain Chamber of Commerce and Industry (BCCI), estimates that the direct economic loss to the economy from the unrest has been over US $2bn. This has occurred mainly in the tourism sector (hospitality and events), and reduced consumer spending in the retail sector.

5) Credit Downgrade.  

As a result of the unrest, Standard & Poors lowered Bahrain’s long- and short-term sovereign rating one notch and placed it on the Ratings Watch Negative (RWN) list. This adversely affects both the government and Bahraini banks who must pay or charge higher interest on debt, and may affect the long term status of Bahrain as a regional and global center of banking and finance.