The International Monetary Fund (IMF) has recently extolled Bahrain’s efforts towards diversifying its economy, urging for continued financial stability and acceleration of structural reforms.
In a conversation with Middle East News, the Head of the IMF Mission to Bahrain, Asma Al-Janaini, praised the country for having made significant strides in diversifying its economy. She highlighted the decrease in the economy’s dependence on the hydrocarbon sector, especially in terms of Gross Domestic Product (GDP), exports, and fiscal revenues.
Bahrain’s GDP growth rate hit 4.9% in 2022, propelled by the non-oil economy, which grew by an impressive 6.2% – the highest growth rate the country has seen in about a decade.
Following the conclusion of the IMF Executive Board’s Article IV consultation with Bahrain, Al-Janaini noted that this robust growth was primarily driven by the financial services and hospitality sectors, as well as manufacturing. Among these sectors, hospitality – specifically hotels and restaurants, experienced a growth rate of 14% due to the wide-scale reopening of the economy in mid-2021, and the successful response to the COVID-19 pandemic by authorities.
On the other hand, the IMF anticipates a slowdown in overall GDP growth in 2023 to 2.7%, and a decrease in non-oil economy growth to 3.3%. Al-Janaini attributed this slowdown to several factors, the most prominent being the fiscal adjustments outlined in the 2023-2024 budget, tightening global financial conditions, and rising interest rates. She also mentioned the base effect associated with Bahrain’s strong economic growth in 2022.
The non-hydrocarbon sector’s contribution to the real GDP reached an unprecedented level of 83% in 2022, making Bahrain’s economy one of the most diversified in the Gulf Cooperation Council (GCC) countries.
Al-Janaini credited the strong performance of the non-oil economy to Bahraini authorities’ commitment to economic diversification policies, applauding their efforts in empowering the private sector and developing strategic sectors such as tourism, logistics, finance, and information and communication technologies, within the economic recovery plan launched in October 2021.
In addition, Al-Janaini welcomed the authorities’ progress on the agenda for regional integration. She cited, for instance, the issuance of multiple-entry visas for GCC countries, expected to boost the tourism sector throughout the region, including Bahrain.
Al-Janaini further urged Bahrain to continue deepening its efforts, which would enhance the economy’s resilience to financial and economic shocks, including those resulting from global recession and oil price volatility.
As Bahrain continues to actively diversify its economy and expand non-oil sectors, it stands as a testament to the promising future of diversified economies in the GCC region. The country’s strategic move towards the development of key sectors such as tourism, logistics, finance, and technology demonstrates the potential for further economic growth, stability, and resilience.
