Bahrain flag Bahrain: Economic outline

Economic Outline

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Bahrain's economy is closely linked to the fluctuation in global crude oil prices as the rest of the region. However, its impact is much narrower compared to other Gulf countries due to the relatively diverse nature of the Bahraini economy. As such, the economy grew slightly by 2% in 2019 despite a sizeable contraction of the oil industry. Due to the COVID-19 pandemic, it plummeted to -5.1% in 2020 but came back to 2.4% in 2021. GDP growth was expected to strengthen to +3.1% in 2022 and 2023, subject to the post-pandemic global economic recovery (IMF, October 2021). 

Continuing fiscal reforms and emphasing better-targeted subsidies under the Fiscal Balance Program (FBP) helped to narrow the fiscal deficit to 8.04% in 2019 (IMF). Nevertheless, Bahrain’s preliminary estimates of the 2020 total fiscal deficit have reached 1.624 billion dinar (USD 4.31 billion), an increase of 817 million dinar (USD 2.17 billion) from the 2020 approved budget (Finance Ministry, 2021). The substantial pandemic-related crisis package of US$11.3 billion introduced in March 2020, and an additional US$1.3 billion stimulus package in June 2021 to support the sectors hardest-hit by COVID-19, have further limited the country’s fiscal space, and aggravated already weak growth dynamics. More favorable oil market conditions were projected to narrow the fiscal deficit to 8.4% of GDP in 2021 (World Bank, 2021). In 2020 A series of reforms were laid to balance the budget by 2022, but public debt grew to 102.1% of the GDP in 2019, 129.7% in 2020 and 123.4% in 2021. It is expected to reach 125.6% and 128.7% in 2022 and 2023 respectively (IMF, 2021), with sizable gross financing needs. On the other hand, Bahrain's pledge to monetize newly-discovered hydrocarbon reserves of up to 80 billion barrels and around 20 trillion cubic feet of tight natural gas within the next five years will improve its outlook. The non-oil primary balance is expected to keep improving in the back of higher non-oil revenues projected at 6.7% of non-oil GDP in 2020 (Word Bank). Inflation remained low in 2020 (-2.3%) and 2021 (1%), despite the introduction of VAT in January 2019, but is expected to grow again in 2022 and 2023, to 2.7% respectively (World Economic Outlook IMF, October 2021).

Bahrain gave details of a new economic growth and fiscal balance plan in October 2021 that pushes a zero-deficit target back by two years to 2024 from 2022 and increases value-added tax to 10% from 5% (Reuters, 2021).

Persian Gulf nations, among the world’s richest at the turn of the century, have lost ground as the oil price receded. Bahrain, Kuwait, Oman and Saudi Arabia are all dropping out of the global top 20 as living standards stagnate or decline. Unemployment rate among nationals was estimated at 4.9% in 2020 and 3.9% in 2021. It should remain at 3.8% in 2022 and 2023 despite the negative economic impact of the COVID-19 pandemic, according to the latest World Economic Outlook of the IMF (October 2021).

 
Main Indicators 20202021 (e)2022 (e)2023 (e)2024 (e)
GDP (billions USD) 34.72e38.8743.5445.0346.74
GDP (Constant Prices, Annual % Change) -4.9e2.23.43.03.0
GDP per Capita (USD) 23e26282929
General Government Gross Debt (in % of GDP) 129.7128.5119.5121.7124.3
Inflation Rate (%) -2.3-0.63.53.41.8
Unemployment Rate (% of the Labour Force) 5.96.65.54.44.0
Current Account (billions USD) -3.252.603.732.231.36
Current Account (in % of GDP) -9.36.78.65.02.9

Source: IMF – World Economic Outlook Database, 2016

Note: (e) Estimated Data

 
Monetary Indicators 20152016201720182019
Baraini Dinar (BHD) - Average Annual Exchange Rate For 1 GHS 0.100.090.090.080.08

Source: World Bank, 2015

 

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Latest Update: November 2022