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Economic Overview

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 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 38.4734.7339.1041.0642.87
GDP (Constant Prices, Annual % Change) 2.6-5.1e2.43.13.1
GDP per Capita (USD) 25,925e23,590e26,29427,05327,678
General Government Gross Debt (in % of GDP) 102.1129.7e123.4125.6128.7
Inflation Rate (%) 1.0-2.31.02.72.7
Unemployment Rate (% of the Labour Force) 4.04.93.93.83.8
Current Account (billions USD) -0.79-3.25e-1.14-1.18-1.35
Current Account (in % of GDP) -2.1-9.3e-2.9-2.9-3.2

Source: IMF – World Economic Outlook Database , October 2021

Note: (e) Estimated Data

Country Risk

See the country risk analysis provided by La Coface.

 

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Main Sectors of Industry

Bahrain has a labor force of more than 1.01 million out of its 1.7 million population. The contribution of the agriculture to Bahrain's economy is negligible due to a scarcity of fertile lands, low rainfall and the small size of the country. In 2021, its share of the GDP was 0.3% - one of the lowest shares in the world - and employed 1% of the labour force (World Bank, 2022). Date palm cultivation and the pearl industry used to account for a considerable share of the economy prior to the development of the oil industry.

In 2021,employment in industry amounted to 35% of the workforce, a rate that has been stable since 2010. Its share in the local economy is lower, at 40.3%, in 2021 (World Bank, 2022), and revolves around aluminium, petrochemicals and food processing.The Alba aluminium shelter is one of the largest in the world, producing more than 2% of global output and 15% of Bahrain's GDP (NBK Bahrain).

The services sector employed 64% of the workforce, a rate that has declined since early 2000s, and accounted for 56.6% of the economy in 2021 (World Bank, 2022). Bahrain's financial sector plays a preeminent role among Gulf countries and contributes significantly to local economy. Other major services sectors include telecommunications and transportation. Tourism is another important sector of the economy and the country attracts almost 10 times its resident population in a given year. A total of 3.2 million visitors arrived in Bahrain in the first quarter of 2019 according to Bahrain Tourism and Exhibitions Authority, the most of them from Arab states of the Persian Gulf.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 0.9 35.3 63.8
Value Added (in % of GDP) 0.3 40.5 59.2
Value Added (Annual % Change) 0.2 -0.9 -5.1

Source: World Bank - Latest available data.

 
Monetary Indicators 20152016201720182019
Baraini Dinar (BHD) - Average Annual Exchange Rate For 1 USD 0.380.380.380.380.40

Source: World Bank - Latest available data.

 

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Foreign Trade

Bahrain's market constitutes one of the most diversified economies in the region. The country is very open to foreign trade, which accounted for 141.7% of the GDP in 2019 (World Bank, 2022). Petrochemical products account for over 42% of Bahraini exports, a share that is relatively low compared to the rest of the region. Bahrain has a strong steel and aluminium industry, accounting for up to 23.6% of exports. Petroleum products also account for the largest item of imports (30%), mainly crude oil imports from Saudi Arabia, followed by machineries, electrical and electronic equipment and cars and other vehicles.

Saudi Arabia is the top destination for Bahraini exports (25%), followed by the United Arab Emirates (18%), the United States (9.8%), Oman (5.4%) and Egypt (4.7%). Saudi Arabia was also the main supplier in 2021 (34% of total imports), followed by China (11%), Australia (5.1%) and the United Arab Emirates with 5% (Trade Economics, 2022).

Bahrain's trade balance is structurally positive (in 2019 of an estimated USD 6,47 billion) but it is strongly linked to oil prices. Bahrain exports of goods stood at 14 billion USD in 2020, while imports declined from 13.2 billion USD to 12.6 billion USD in 2020 according to data from WTO. Exports of services remained stable at 11.4 billion USD in 2020, whereas imports of services increased to 9.2 billion USD (WTO, 2022).

Bahrain’s trade balance saw a surplus of 2 million BD ($5.3 million USD) in November 2021, a 101% improvement from the 163 million BD (432 million USD) deficit for the same period in 2020 as the country recovers from the impact of coronavirus on its economy. According to the kingdom’s foreign trade report, issued by the Information and eGovernment Authority in December 2021, the value of imports increased by 13%, reaching 453 million BD (1.2 billion USD), during November 2021 compared to 402 million BD (1.06 billion USD) for the same month in 2020.

 
Foreign Trade Values 20162017201820192020
Imports of Goods (million USD) 8,70010,85014,87113,25612,683
Exports of Goods (million USD) 11,96015,37618,04418,12014,066
Imports of Services (million USD) 1,7427,8008,0778,0839,263
Exports of Services (million USD) 3,17011,35612,24911,77611,468

Source: World Trade Organisation (WTO) ; Latest available data

Foreign Trade Indicators 20152016201720182019
Foreign Trade (in % of GDP) 154.9139.6143.1151.4142.4
Trade Balance (million USD) 831-804-700-1,066n/a
Trade Balance (Including Service) (million USD) 3,3512,6942,8562,910n/a
Imports of Goods and Services (Annual % Change) -5.7-3.27.65.7-5.6
Exports of Goods and Services (Annual % Change) -0.8-2.83.73.60.3
Imports of Goods and Services (in % of GDP) 71.865.467.371.865.5
Exports of Goods and Services (in % of GDP) 83.174.275.879.676.8

Source: World Bank ; Latest available data

Foreign Trade Forecasts 20212022 (e)2023 (e)2024 (e)2025 (e)
Volume of exports of goods and services (Annual % change) -17.27.76.05.35.3
Volume of imports of goods and services (Annual % change) -12.65.64.54.34.0

Source: IMF, World Economic Outlook ; Latest available data

Note: (e) Estimated Data

 
International Economic Cooperation
Member of Gulf Cooperation Council (GCC)

Member of Arab League.

The country is also part of the Greater Arab Free Trade Area (GAFTA), a pact of the Arab League entered into force in January 2005 which aims to form an Arabic free trade area.

 

Main Partner Countries

Main Customers
(% of Exports)
2018
Saudi Arabia 13.3%
United Arab Emirates 6.1%
United States 4.8%
Oman 4.6%
Egypt 3.6%
See More Countries 67.6%
Main Suppliers
(% of Imports)
2018
Saudi Arabia 33.1%
China 9.1%
United Arab Emirates 6.4%
United States 5.9%
Australia 4.6%
See More Countries 41.0%

Source: Comtrade, Latest Available Data

 

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Political Outline

Current Political Leaders
King: Hamad bin Isa Al Khalifa, since March 1999;
Prime minister: Prince Salman bin Hamad Al Khalifa since 11 November 2020.
Next Election Dates
Parliamentary and municipal elections: November 2022
Main Political Parties
Athough official political parties are illegal, the government authorises political societies and associations. Progovernmental societies include: The Al-Asalah Islamic Society, main Sunni Salafist political party in Bahrain, Minbar (Sunni Muslim Brothers), the Al Mustaqbal coalition; oppositional forces include Al-Wifaq (Shia), Democratic Action and Haq (Shia).
Executive Power
King Hamas bin Isa Al Khalifa has been the head of the state since March 1999. Prince Salman bin Hamad Al Khalifa, his eldest son, is the prime minister since 11 November 2020 and is the head of the Council of Ministers.
Legislative Power
The legislative power belongs to the bicameral National Assembly, which consists of an elected Council of Representatives (40 seats) and the Consultative Council (Shure, 40 seats), whose members are appointed by the King.
 

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COVID-19 Country Response

COVID-19 epidemic evolution
To find out about the latest status of the COVID-19 pandemic evolution and the most up-to-date statistics on the COVID-19 disease in Bahrain, please visit the Ministry of Health´s website.  
For the international outlook you can consult the latest situation reports published by the World Health Organisation as well as the global daily statistics on the coronavirus pandemic evolution including data on confirmed cases and deaths by country.
Sanitary measures
To obtain the up-to-date information on the containment measures put in place and public health recommendations please consult the latest publications from the Ministry of Health.
Travel restrictions
The COVID-19 situation, including the spread of new variants, evolves rapidly and differs from country to country. All travelers need to pay close attention to the conditions at their destination before traveling. Regularly updated information for all countries with regards to Covid-19 related travel restrictions in place including entry regulations, flight bans, test requirements and quarantine is available on TravelDoc Infopage.
It is also highly recommended to consult COVID-19 Travel Regulations Map provided and updated on the daily basis by IATA.
The US government website of Centers of Disease Control and Prevention provides COVID-19 Travel Recommendations by Destination.

The UK Foreign travel advice also provides travelling abroad advice for all countries, including the latest information on coronavirus, safety and security, entry requirements and travel warnings.
Import & export restrictions
For the information on all the measures applicable to movement of goods during the period of sanitary emergency due to the COVID-19 outbreak (including eventual restrictions on imports and exports, if applicable), please consult the Bahraini Customs
For a general overview of trade restrictions due to COVID-19 pandemic, please consult the section dedicated to Bahrain on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.
Economic recovery plan
Most of the economic measures taken by the Bahrain government to address the impact of the COVID-19 pandemic on the national economy are addressed here.
For the general overview of the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and macroeconomic) taken by the Bahrain government to limit the socio-economic impact of the COVID-19 pandemic, please consult the section dedicated to Bahrain in the IMF’s Policy Tracker platform.
Support plan for businesses
For the updated information with regards to specific schemes in support of business companies following the coronavirus epidemic outbreak, please visit the website of the Ministry of Industry , Commerce & Tourism of Bahrain.
Additionnaly, some measures to support private sector can be found here. For a general overview of international SME support policy responses to the COVID-19 outbreak refer to the World Bank's Map of SME-Support Measures in Response to COVID-19.
Support plan for exporters
The country's government official sources do not provide yet information with regards to specific schemes in support of exporting companies following the coronavirus epidemic outbreak. For the updated information please visit the website of the Ministry of Industry, Commerce & Tourism of Bahrain.
 

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