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Economic Overview

Despite its limited oil wealth, Bahrain boasts one of the most diversified economies in the GCC, driven by construction, manufacturing, and a strong services sector. The non-oil sector continues to be the main engine of economic growth. The government’s four-year plan (2023-2026) focuses on key objectives, including improving living standards, enhancing infrastructure, and speeding up digital transformation. After moderating to 3% in 2023 due to tighter financial conditions and negative growth in the oil sector, preliminary data shows that the economy grew by 3.5% in 2024, driven primarily by diverse non-oil activities. The hydrocarbon sector saw a slight improvement in 2024, thanks to increased oil production at the Abu Safah oilfield. The non-oil sector expanded by 3.8%, supported by tourism, services, and ongoing infrastructure projects. Growth is expected to moderate to around 3% in the medium term, influenced by persistently high interest rates and fiscal consolidation (data from World Bank).

On the fiscal front, the Fiscal Balance Program (FBP) has concentrated on boosting revenue while controlling government spending. Notable reforms include the doubling of the VAT rate to 10% in 2022 and, more recently, the introduction of the domestic minimum top-up tax (DMTT) in September 2024. This new tax imposes a minimum 15% rate on the profits of multinational enterprises with global revenues exceeding EUR 750 million (USD 828 million), effective from 1 January 2025. Limited spending growth under the FBP and higher oil revenues lead to a lower fiscal deficit of 9% of GDP in 2024, down from over 10% of GDP in 2023. However, achieving fiscal balance will likely require higher oil prices. Non-hydrocarbon revenues are anticipated to rise in 2025-26, supported by the implementation of the newly announced corporate tax and the expanding capacity of the Sitra oil refinery. Fiscal challenges persist as public debt remains high (estimated at 126.7% in 2024, from 123.3% one year earlier) and reserves are low, exposing ongoing fiscal and external vulnerabilities in the medium term. Without further fiscal reforms and in the face of expected low commodity prices and monetary tightening, both fiscal and external accounts are likely to remain under pressure. Inflation was estimated to be low at 1.3% in 2024 and is expected to converge to below 2% in the medium term, driven by strong domestic demand. However, the positive effects of tighter monetary policy, aligned with the currency peg to the U.S. dollar, will help contain any significant price increases (data World Bank).

Being a small country, Bahrain relies heavily on the foreign workforce. By the second quarter of 2024, the number of active foreign worker permits reached 631,763 in 2024, marking a 3.8% annual increase compared to 608,411 permits in the corresponding period one year earlier. Between January and June 2024, the number of Bahrainis employed reached 12,555, representing 63% of the annual target of employing 20,000 Bahrainis, as outlined in the Economic Recovery Plan (data Labour Market Regulatory Authority). Overall, Bahrain has a high GDP per capita (PPP), estimated at USD 65,344 in 2024 by the IMF.

 
Main Indicators 2023 (E)2024 (E)2025 (E)2026 (E)2027 (E)
GDP (billions USD) 46.0847.8149.5451.6954.00
GDP (Constant Prices, Annual % Change) 3.03.03.22.92.8
GDP per Capita (USD) 29,21929,57329,88630,42330,998
General Government Gross Debt (in % of GDP) 123.3126.7129.8132.3135.4
Inflation Rate (%) 0.11.41.82.02.0
Unemployment Rate (% of the Labour Force) 6.30.00.00.00.0
Current Account (billions USD) 2.702.512.252.232.12
Current Account (in % of GDP) 5.95.34.54.33.9

Source: IMF – World Economic Outlook Database , October 2021

Country Risk

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Main Sectors of Industry

Bahrain has a labour force of more than 905,000 out of its 1.57 million population. The contribution of agriculture to Bahrain's economy is negligible due to a scarcity of fertile lands, low rainfall, and the small size of the country. In 2023, its share of the GDP was 0.3% - one of the lowest shares in the world - and employed 0.9% of the labour force (World Bank, latest data available). 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. According to the latest governmental figures, the agricultural sector recorded a 4.7% year-on-year growth in gross value added in 2023, with around 1,500 active companies.

Employment in industry amounts to 34.7% of the workforce, a rate that has been stable since 2010. The share of the primary sector in the national economy stands at 44% (World Bank) 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). Overall, the manufacturing sector is estimated to account for 21% of GDP, while oil rents cumulate 10.9% (World Bank). As a small non-OPEC Gulf oil producer with around 124.6 million barrels of proven reserves, Bahrain derives its oil revenues from two fields: the onshore Bahrain field and the offshore Abu Safah field, which it shares with Saudi Arabia. As per official figures, the manufacturing sector recorded year-on-year growth rates of 3.9%, 1.7%, and 4.2% in the first three quarters of 2024, respectively.

The services sector employs 64.5% of the workforce, a rate that has declined since the early 2000s, and accounts for 51.8% of the economy (World Bank). Bahrain's financial sector plays a preeminent role among Gulf countries and contributes significantly to the local economy: the financial corporations are one of the largest non-oil sectors contributing to the real GDP by 18.08% (official governmental figure). The banking sector includes 29 retail banks (13 locally and incorporated and 16 foreign banks’ branches), 53 wholesale banks, and 8 representative offices of overseas banks, with USD 247.8 billion in assets as of January 2025 (data Central Bank of Bahrain). In 2023, the financial services sector surpassed the oil sector to become the largest contributor to real GDP, accounting for 17.8%. Other major service 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.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 0.9 34.7 64.5
Value Added (in % of GDP) 0.3 44.0 51.8
Value Added (Annual % Change) 4.7 -0.4 5.4

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 accounts for around 158% of the GDP (World Bank, latest data available). Bahrain has a strong steel and aluminium industry: unwrought aluminium alloys emerged as the leading exports in 2023, totalling BHD 1.059 billion (27%), trailed by agglomerated iron ores and concentrates alloyed at BHD 689 million (18%), and non-alloyed aluminium wire ranking third with BHD 223 million (6%). As per imports, non-agglomerated iron ores and concentrates alloyed emerged as the top product imported to Bahrain, with a total value of BHD 602 million (10%). Following closely, other aluminium oxide ranked second at BHD 448 million (8%), while gold ingots secured the third position with BHD 221 million (4% - data Information & eGovernment Authority).

Overall, the country has a structural trade surplus. In 2023, China held the top position for imports to Bahrain, reaching BHD 808 million (14%), followed by the United Arab Emirates in second place with BHD 547 million (9.5%), and Brazil ranking third with BHD 523 million (9%). On the other hand, the Kingdom of Saudi Arabia secured the top rank among countries for the exports of products with national origin, totalling BHD 937 million (24%). Following closely, the United Arab Emirates ranked second with BHD 444 million (11%), while the United States of America held the third position with BHD 371 million (9% - data Information & eGovernment Authority).

As per governmental data, the value of imports has decreased by 1%, reaching BHD 5.778 billion during 2023, compared to BHD 5.842 billion in 2022. Conversely, the value of exports of products with national origin marked a decrease by 21% to BHD 3.909 billion during 2023, compared to BHD 4.967 billion in 2022.
Preliminary data from iGA indicate that the value of imports rose by 2% in 2024, reaching BD 5,872 million, up from BD 5,778 million in 2023. Meanwhile, exports of nationally-originated products declined by 1%, totalling BD 3,864 million in 2024. Re-exports saw an 8% increase, rising to BD 819 million compared to BD 756 million in 2023.

 
Foreign Trade Values 20192020202120222023
Imports of Goods (million USD) 13,25612,68314,18815,53715,367
Exports of Goods (million USD) 18,12014,06622,36930,19425,235
Imports of Services (million USD) 8,0839,26310,2898,582n/a
Exports of Services (million USD) 11,76511,49713,22511,571n/a

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

Foreign Trade Indicators 20192020202120222023
Foreign Trade (in % of GDP) 135.4135.5153.8166.3157.8
Trade Balance (million USD) 856-1274,9058,2454,503
Trade Balance (Including Service) (million USD) 4,3561,9527,65711,5137,970
Imports of Goods and Services (Annual % Change) -5.6-0.715.211.92.6
Exports of Goods and Services (Annual % Change) 0.4-2.529.59.2-9.1
Imports of Goods and Services (in % of GDP) 62.365.067.570.870.3
Exports of Goods and Services (in % of GDP) 73.170.586.395.587.6

Source: World Bank ; Latest available data

Foreign Trade Forecasts 20242025 (e)2026 (e)2027 (e)2028 (e)
Volume of exports of goods and services (Annual % change) 1.72.51.51.51.2
Volume of imports of goods and services (Annual % change) 1.11.70.80.90.9

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)
2023
Saudi Arabia 23.5%
United Arab Emirates 14.3%
United States 8.4%
Netherlands 4.4%
Egypt 3.7%
See More Countries 45.8%
Main Suppliers
(% of Imports)
2023
China 14.0%
United Arab Emirates 9.4%
Brazil 9.1%
Australia 8.2%
Saudi Arabia 6.4%
See More Countries 53.0%

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: November 2026
Main Political Parties
Although official political parties are banned in Bahrain, the government permits the formation of political societies and associations, which function similarly to parties. Pro-government societies include the Al-Asalah Islamic Society, the main Sunni Salafist group; Al-Minbar, affiliated with the Sunni Muslim Brotherhood; and the Al-Mustaqbal coalition. Opposition groups have included Al-Wifaq, a prominent Shia political society; Democratic Action; and Haq, another Shia-based group.
Executive Power
Executive power in Bahrain is vested in the King, who appoints both the Prime Minister and the Cabinet. The Prime Minister is responsible for overseeing the day-to-day operations and administration of the government. King Hamad bin Isa Al Khalifa has served as head of state since March 1999, and formally assumed the title of King in 2002. His eldest son, Crown Prince Salman bin Hamad Al Khalifa, has been Prime Minister since 11 November 2020 and also heads the Council of Ministers.
Legislative Power
Legislative power in Bahrain is held by the bicameral National Assembly, which comprises two chambers: the Council of Representatives, with 40 members elected by popular vote, and the Consultative Council (Shura Council), with 40 members appointed by the King.
 

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