Bahrain’s real GDP is expected to exceed BD13 billion ($34.48 billion) in 2022 and 2023 – the highest figure seen in a decade – driven by non-oil GDP growth and greater private sector contribution towards economic activities, says a report.

 

Coming out of a pandemic that had its adverse impacts on the economy for the past two years, Bahrain has shown recovery in 2022, and more disciplined spending over the last five years, said the SICO report titled Bahrain Special – Between achievements and acceleration towards targets – Feb 2023. 

 

The year 2022 can be best characterised as a year of acceleration and diligent movement towards crucial targets set for achieving fiscal balance by 2024, it said.

 

The report indicates the tangible progress in Bahrain’s economic recovery plan and fiscal balance.

 

The in-depth report objectively discusses Bahrain’s economic growth, fiscal position, debt trajectory, strategic investments, and projects aligned. It sheds light on the progress of the fiscal balance program against the targets set, as well as the risks and challenges that Bahrain might face. 

 

Since publishing our report, Bahrain has released its preliminary fiscal numbers for the year 2022 reflecting a deficit of BD178 million compared to a deficit of BD952 million in 2022. Non-oil revenues were 28% higher YoY reaching BD1.065 billion in 2022. 

 

This comes mainly because of Bahrain’s VAT hike to 10% in 2022. Both narrowing deficits and higher non-oil revenues reflect Bahrain’s diligence in meeting the targets it has set in Fiscal Balance Report, said SICO.

 

Fiscal discipline and improving non-oil revenues due to the introduction of taxation over the last five years have led to narrowing deficits. The government’s prudent management of recurrent expenses has translated into a decline in expenditure for two main recurrent categories: the wage-bill and subsidies. Meanwhile, the key challenge for the government remains in managing its debt service cost, the report said.

 

“The accelerated economic recovery has contributed positively towards lowering the unemployment rate to 5.2% in 2022. Furthermore, narrowing gaps between public and private sector wages resulted in higher employment in the private sector. Looking back at what has been achieved so far and what is yet to be accomplished allows for the conclusion that the past year was one of post-pandemic transition, acceleration, and a realisation of the ever-pressing demands that the government faces on the road to fiscal balance,” it said. 

 

Increasing risks of higher interest rates, mounting inflationary pressures, and growing competition all add to the heavy demands on Bahrain’s government to balance prudence, while ensuring consumers and vulnerable families are supported. With one year to achieve fiscal balance as per the national target (by 2024), building on the achievements the government has made so far will allow for successful acceleration towards the targets, the report notes. -TradeArabia News Service