Bahrain’s economy expands by 4.9% in 2022, the fastest in a decade

Bahrain’s economy grew by 4.9 per cent in 2022, the fastest pace recorded in a decade driven by an acceleration in non-oil growth, according to preliminary data from the country’s Information and eGovernment Authority.

According to a statement from Bahrain’s Ministry of Finance, the country’s non-oil sector grew by 6.2 per cent in 2022, the highest growth rate recorded over the past ten years. It exceeded the 5 per cent growth target set under the government’s economic recovery plan that was launched in 2021 in response to the pandemic.

Non-oil sectors witnessed year-on-year growth in real terms last year, with the hospitality sector leading at 13.9 per cent, followed by government services at 6.7 per cent and real estate and business activities at 5.5 per cent. Its trade activity expanded by 5.4 per cent in 2022 while the manufacturing sector stood at 4.9 per cent, transportation and communications at 4.5 per cent, financial corporations at 4.1 per cent and construction at 1.4 per cent.

Bahrain on right track to achieve its economic goals, says Finance and National Economy Ministerhttps://t.co/ZnsKtBbieh

— Bahrain News Agency (@bna_en) March 27, 2023

The International Monetary Fund (IMF) projected in June 2022 that recovery will continue at a moderate pace while acknowledging headwinds stemming from the slowing global economy, geopolitical tensions and tightening global financial conditions.

Bahrain’s oil GDP posted a remarkable 33.7 per cent annual growth in nominal terms last year, underscoring the surge in oil prices, which saw the Brent benchmark averaging $100 per barrel compared to $70.7 for 2021.

Read: Why Bahrain remains a key player in GCC’s financial sector 

The kingdom, often seen as one of the weakest links among oil-rich GCC nations, still relies on hydrocarbon revenues to balance its books due to its high debt levels. The IMF estimates that Bahrain needs an oil price of around $122 per barrel this year, the highest among neighbours and way below current levels, to balance its budget.

Bahrain’s sustainable growth

Meanwhile, Bahrain’s ministry of finance in February said the preliminary financial estimates for 2022 showed the country’s deficit dropping by 85 per cent.

The country reported a mid-year budget surplus of $88m, with revenues in the Gulf state soaring by 52 per cent compared to the same period last year.

The current oil price outlook has also created an ideal environment for the government to proceed with its ambitious economic reforms under favourable macroeconomic and financing conditions.

Finance and National Economy Minister Shaikh Salman bin Khalifa Al Khalifa told the state-run Bahrain News Agency that the country was committed to executing its fiscal balance plan and adopting initiatives that serve its targets.

Under the Economic Recovery Plan, Bahrain seeks to launch strategic projects worth over $30bn. In line with this vision, Aluminium Bahrain commissioned the forced cooling network project at Potlines 4 and 5 in January 2023.

The country also signed an integrated industrial partnership with the UAE, Jordan and Egypt, with an investment size of $2bn earlier in February. Under the agreement, Bahrain’s Alpha Biotech company inked an MoU with Jordan’s Itqan Pharmaceutical to produce pharmaceutical products.

Read: UAE, Egypt, Jordan, Bahrain sign industrial deals worth $2bn

Similarly, Bahrain’s Gulf Biotech Company and Egypt’s BioGeneric Pharma agreed to build a $103m plant to produce raw materials for vaccines and other pharmaceutical products.

The country is also implementing a series of reforms to bolster public finances and non-oil growth, balance its budget and stem government debt, including increasing VAT, offering permanent residence to some foreigners and privatising some government assets.

Bahrain Economic Development Board (EDB), the country’s investment promotion agency, attracted a record $1.1bn in direct investment in 2022. The investments from 88 companies are expected to generate over 6,300 jobs in the country over the next three years.

The investments are in key sectors including financial services, ICT, logistics, manufacturing and tourism. The EDB seeks to attract $2.5bn in direct investment this year.