Panorama econòmic

Economic indicators

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. Bahrain experienced strong growth in 2022 (+4.9%); however, growth moderated to 2.7% in 2023, driven by non-oil GDP expanding by 3.3%, attributed to fiscal consolidation, increased interest rates, and a base effect from strong growth in 2022. Going forward, GDP is expected to pick up to 3.6% in 2024 and 3.2% the following year, on the back of higher energy prices, easing monetary policy, and stronger export growth (IMF). Private consumption is poised to remain the primary growth driver, constituting approximately 40% of GDP, buoyed by alleviating inflationary pressures. However, notable uncertainty persists in the forecast, stemming from factors such as oil price fluctuations, international financial instability, ongoing tightening measures, and a potential slowdown in global growth.

In 2023, Fitch projected that the general government budget deficit would narrow to 4.9% of GDP, down from 5.9% in 2022. Despite a decline of approximately 3% in oil revenue, revenues were expected to increase. Fitch also forecasted a similar trend for 2024, projecting a budget deficit of 3.4% of GDP. The authorities aimed for a balanced budget with an oil price of USD 60 per barrel in 2024, a considerable reduction from the USD 105 fiscal breakeven oil price in 2022. According to Fitch, the budget for 2023-24 outlined a credible strategy for substantially enhancing the non-oil balance. This strategy encompassed increased revenues from newly implemented and revised taxes and fees, augmented revenues from gas sales achieved through enhanced collection methods and higher volumes, as well as elevated dividends from state-owned enterprises (SOEs). Despite robust fiscal reform efforts and a reduction in budget deficits, the debt-to-GDP ratio rose to 121.2% in 2023, up from 117.6% the previous year. Also, thanks to the positive impact of subsidies, inflation decreased in 2023, averaging an estimated 1%, following a 3.6% rate in 2022 (IMF). Over the forecast horizon, inflation is expected to remain between 1.4%-1.8%.

Being a small country, Bahrain relies heavily on the foreign workforce. In the second quarter of 2023, total employment reached 770,129 workers. Foreign workers' employment accounted for 609,028 workers by the quarter's end, marking an 8.1% annual increase. Meanwhile, Bahraini employment stood at 161,101 workers, reflecting a slight annual decline of 0.2% (data Labour Market Regulatory Authority). According to the latest figures available from the IMF, unemployment stood at 5.4% as of end-2022. Overall, Bahrain has a high GDP per capita (PPP), estimated at USD 61,248 in 2022 by the World Bank.

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