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Bahrain Economic Forecast

Bahrain Economic Outlook

Although partly driven by a more unfavorable base effect, annual economic growth should have softened further in the last three months of 2022. Higher interest rates will have dampened domestic demand. That said, slightly softer inflation in the final three months of the year likely provided some breathing room to households’ budgets. Moving to 2023, available data is mixed. The value of domestic-origin merchandise exports slid by 8.0% year on year in January. Conversely, goods imports grew an annual 4.0% in the same month, widening the trade deficit further. In other news, the government plans to double the anti-inflation allowance for households during the holy month of Ramadan—starting in late March—which should boost private spending.

Bahrain Inflation

Inflation plunged to a 13-month low of 0.8% in January (December: 3.6%) as price pressures for food and beverages and transportation eased markedly. This was largely due to a statistical effect: The VAT was doubled to 10% in January last year. This year, tighter monetary policy will downwardly pressure inflation, exacerbating the impact of the base effect.

Bahrain Economic Data

2017 2018 2019 2020 2021
Population (million) 1.5 1.5 1.5 1.5 1.5
GDP (USD bn) 35.3 37.7 38.6 34.6 38.8
GDP per capita (USD) 23 25 25 23 26
GDP (BHD bn) 13.3 14.2 14.5 13.1 14.6
Economic Growth (Nominal GDP, ann. var. %) 9.8 6.7 2.3 -10.2 11.9
Economic Growth (GDP, ann. var. %) 3.8 2.3 2.2 -4.9 2.2
Private Consumption (ann. var. %) 1.3 1.4 0.5 -4.4 18.9
Government Consumption (ann. var. %) 11.0 1.8 -1.5 -2.5 6.5
Fixed Investment (ann. var. %) 10.6 9.4 -2.8 -3.8 -4.2
Exports (G&S, ann. var. %) 3.7 3.3 0.4 -2.5 29.5
Imports (G&S, ann. var. %) 7.6 5.7 -5.6 -0.7 15.2
Fiscal Balance (% of GDP) -14.0 -11.8 -9.0 -17.9 -
Public Debt (% of GDP) 88.1 94.6 101.6 129.7 128.5
Money (ann. var. of M2 %) 4.2 2.4 11.1 6.5 4.9
Inflation (CPI, ann. var. %, aop) 1.4 2.1 1.0 -2.3 -0.6
1-Week Deposit Rate (%, eop) 1.75 2.75 2.25 1.00 1.00
Exchange Rate (BHD per USD, eop) 0.38 0.38 0.38 0.38 0.38
Current Account Balance (USD bn) -1.4 -2.4 -0.8 -3.2 2.6
Current Account Balance (% of GDP) -4.1 -6.4 -2.1 -9.3 6.7
Merchandise Trade Balance (USD bn) -0.5 -1.1 0.9 -0.1 4.9
Merchandise Exports (USD bn) 15.5 18.0 18.1 14.0 22.3
Merchandise Imports (USD bn) 16.0 19.0 17.2 14.2 17.4
Merchandise Exports (ann. var. %) 21.4 16.2 0.5 -22.4 59.1
Merchandise Imports (ann. var. %) 18.3 18.8 -9.6 -17.8 23.1
Foreign Direct Investment (USD bn) 1.4 1.7 1.5 1.0 1.8
International Reserves (USD bn) 2.3 1.9 3.4 1.9 3.9
International Reserves (months of imports) 1.8 1.2 2.4 1.7 2.7

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