Bahrain Economic Outlook

November 27, 2018

Macroeconomic fundamentals continued to deteriorate through September: The public debt ratio rose further; the short-term government bond yields spiked, highlighting that investors are losing confidence in the government’s ability to finance its debt; while international reserves also plummeted to a near-record low in September, covering less than a month’s imports. In more positive news, the four-year USD 10 billion financial aid package secured from the Gulf Cooperation Council in early October should support reserves going forward, with the first tranche expected to be disbursed before the end of the year. Additionally, underlining efforts to raise non-oil revenues, Bahrain will implement a 5% VAT on 1 January 2019 while APM Terminals Bahrain, a port operator, has been listed for an IPO.

Bahrain Economic Growth

The oil and construction sectors should buttress the economy next year, while the financial aid package and subsequent economic reforms should buoy business confidence. Government spending curbs, however, could dampen domestic demand. FocusEconomics panelists expect GDP to grow 2.7% in 2019, down 0.1 percentage points from last month’s forecast, and 2.6% in 2020.

Bahrain Economy Data

	2013	2014	2015	2016	2017
Population (million)	1.3	1.3	1.4	1.4	1.5
GDP per capita (USD)	25,900	25,319	22,658	22,498	24,232
GDP (USD bn)	32.5	33.3	31.1	32.1	35.2
Economic Growth (GDP, annual variation in %)	5.4	4.4	2.9	3.2	3.9
Consumption (annual variation in %)	9.9	-0.7	1.9	0.5	-
Investment (annual variation in %)	16.9	5.9	-8.5	11.0	-
Unemployment Rate	4.3	4.1	4.2	4.3	-
Fiscal Balance (% of GDP)	-3.3	-3.6	-13.0	-13.6	-11.0
Public Debt (% of GDP)	41.3	42.0	60.3	72.1	79.8
Money (annual variation in %)	8.2	6.5	2.9	1.2	4.2
Inflation Rate (CPI, annual variation in %)	3.2	2.7	1.8	2.8	1.4
Policy Interest Rate (%)	0.50	0.50	0.75	1.00	1.75
Exchange Rate (vs USD)	0.38	0.38	0.38	0.38	0.38
Exchange Rate (vs USD, aop)	0.38	0.38	0.38	0.38	0.38
Current Account (% of GDP)	7.4	4.6	-2.4	-4.6	-3.9
Current Account Balance (USD bn)	2.4	1.5	-0.8	-1.5	-1.4
Trade Balance (USD billion)	4.3	3.7	0.8	-0.8	-0.7
Exports (USD billion)	25.5	23.4	16.5	12.8	15.3
Imports (USD billion)	21.2	19.7	15.7	13.6	16.0
Exports (annual variation in %)	10.9	-8.2	-29.6	-22.7	20.2
Imports (annual variation in %)	8.0	-7.0	-20.6	-13.5	18.3
International Reserves (USD)	5.0	5.8	3.1	2.2	2.3

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Bahrain Facts

	Value	Change	Date
Exchange Rate	0.38	0.03 %	Dec 12
Stock Market	1,320	0.04 %	Dec 12

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