Bahrain Economic Outlook

September 8, 2020

After the 1.1% contraction in the first quarter led by a drop in the non-oil sector, the economy is set to have declined sharply in Q2, hampered by the restrictions implemented to contain the pandemic. Q2’s lockdown measures dented an economy already hurt by low oil prices due to falling global demand. Turning to Q3, activity should be recovering following the easing of restrictions. Less positively, on the fiscal front, government debt is on the rise amid a large budget deficit, which could further limit the government’s ability to support a recovery ahead. Consequently, Fitch downgraded the country’s credit rating to B+ from BB- in August. Meanwhile, following the agreement made between the UAE and Israel on 13 August, it is believed that Bahrain could follow the same steps to normalize relations with Israel, which could translate into improved trade relations.

Bahrain Economic Growth

Economic activity is set to contract sharply this year due to the Covid-19 pandemic and associated containment measures weighing on the economy, together with low oil prices and geopolitical instability in the region. However, accommodative monetary policy should cushion the downturn. FocusEconomics analysts project the economy to contract 4.4% in 2020, which is unchanged from last month’s forecast, and to expand 2.4% in 2021.

Bahrain Economy Data

	2015	2016	2017	2018	2019
Population (million)	1.4	1.4	1.5	1.5	1.5
GDP per capita (USD)	22,645	22,597	24,334	25,424	25,461
GDP (USD bn)	31.0	32.2	35.3	37.7	38.5
Economic Growth (GDP, annual variation in %)	2.9	3.5	3.8	1.8	2.0
Consumption (annual variation in %)	-	-	-	-	-
Investment (annual variation in %)	-8.5	10.8	11.0	4.7	-
Unemployment Rate	3.5	4.3	4.1	-	-
Fiscal Balance (% of GDP)	-13.0	-13.6	-10.0	-6.3	-4.7
Public Debt (% of GDP)	60.4	71.8	79.5	80.7	83.0
Money (annual variation in %)	2.9	1.2	4.2	2.4	11.1
Inflation Rate (CPI, annual variation in %)	1.9	2.8	1.4	2.1	1.0
Policy Interest Rate (%)	0.75	1.00	1.75	2.75	2.25
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)	-2.4	-4.6	-4.1	-6.4	-2.1
Current Account Balance (USD bn)	-0.8	-1.5	-1.4	-2.4	-0.8
Trade Balance (USD billion)	0.8	-0.8	-0.5	-1.1	0.9
Exports (USD billion)	16.5	12.8	15.5	18.0	18.1
Imports (USD billion)	15.7	13.6	16.0	19.0	17.2
Exports (annual variation in %)	-29.6	-22.7	21.4	16.2	0.5
Imports (annual variation in %)	-20.6	-13.5	18.3	18.8	-9.6
International Reserves (USD)	3.1	2.2	2.3	1.9	3.4

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Bahrain Facts

	Value	Change	Date
Exchange Rate	0.38	0.03 %	Jan 01

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