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2018-07-16 10:25:00

BAHRAIN'S GDP UP 3.2%

BAHRAIN'S GDP UP 3.2%

IMFOn July 9, 2018, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with the Kingdom of Bahrain.

The decline in oil prices since 2014 and absence of buffers have led to a rise in fiscal and external vulnerabilities. Public debt increased to 89 percent of GDP, with large fiscal and external current deficits persisting. Reserves remain low, covering only 1.5 months of prospective non-oil imports at end 2017.

Output grew by 3.8 percent in 2017, underpinned by a resilient non-hydrocarbon sector, with robust implementation of GCC-funded projects as well as strong activity in the financial, hospitality, and education sectors. The banking system remains stable with large capital buffers. Growth is projected to decelerate over the medium term. Despite planned fiscal consolidation measures, fiscal and external deficits are projected to continue over the medium term, due to the large and growing interest bill. Delays in implementing a credible fiscal plan and changes in market sentiment as global financing conditions tighten present downside risks to the baseline.

Executive Board Assessment 

Executive Directors welcomed the resilience of growth in Bahrain, while noting downside risks to the outlook stemming from the rise in fiscal and external vulnerabilities, tighter global financing conditions, delays in fiscal adjustment, and lower energy prices. Against this background, Directors called for additional sustained efforts to improve Bahrain's fiscal and external positions, preserve financial sector resilience, and support diversified, inclusive growth.

Directors welcomed the authorities' continued fiscal reform efforts, but observed that public debt is expected to increase further over the medium term and reserves are projected to remain low. In this regard, they agreed that a comprehensive package of reforms is needed to reduce fiscal deficits over the medium term. Directors welcomed the authorities' commitment to continue subsidy reforms, cut non‑productive spending, and raise non‑oil revenues by introducing a value‑added tax by 2019. They considered that additional steps are needed to put public finances on a sustainable trajectory, striking the right balance between revenue and expenditure measures while protecting the most vulnerable. In this context, Directors emphasized the need to introduce direct taxation, including a corporate income tax, while containing the public wage bill and targeting subsidies to the poorest. They looked forward to the newly established debt management office developing a contingent financing strategy to mitigate financing risks and costs. Directors also encouraged the authorities to strengthen their macro‑fiscal framework and increase fiscal transparency and accountability, securing public support and awareness, and enhancing market confidence.

Directors agreed that the exchange rate peg remains appropriate for the economy, and delivers a clear and credible policy anchor, keeping inflation low and stable. They underscored the importance of fiscal adjustment in supporting the peg and rebuilding international reserves, and ensuring external sustainability. In this context, Directors recommended gradually unwinding central bank lending to the government.

Directors welcomed the central bank's continued efforts to implement the 2017 FSAP recommendations to further strengthen the regulation and supervision of the financial sector. They emphasized the need to develop a well‑defined emergency liquidity assistance framework, deepen the interbank market, and enhance the supervision of Islamic banks and insurance companies. Directors also encouraged close monitoring of the build‑up of household debt. They welcomed Bahrain's initiatives to promote fintech, while underscoring the importance of monitoring risks. Continued efforts to strengthen the AML/CFT framework were also encouraged.

Directors commended the authorities' initiatives to streamline business regulations to promote private sector development, diversification, and job creation. They welcomed recent developments in enhancing SMEs' access to finance, as well as recent labor market reforms to increase flexibility and promote employment in the private sector. They called for further structural reforms to boost productivity and competitiveness through more privatization plans and public‑private partnerships, and measures to strengthen the education system and support greater female labor force participation.

 Bahrain: Selected Macroeconomic Indicators, 2015–19

     

Est.

Proj.

Proj.

 

2015

2016

2017

2018

2019

 

(Percent change, unless otherwise indicated)

Production and prices

         

Real GDP

2.9

3.2

3.8

3.2

2.6

Real oil GDP1

-0.1

-0.1

-0.7

0.3

0.2

Real non-oil GDP

3.6

4.0

4.8

3.9

3.1

Nominal GDP (billions of US$)

31.1

32.2

35.3

39.1

41.3

Consumer price index (period average)

1.8

2.8

1.4

3.0

5.1

 

(Percent of GDP, unless otherwise indicated)

Fiscal variables

         

State revenue

18.2

17.6

18.3

22.2

21.9

Of which: oil revenue

13.8

12.0

12.6

15.6

14.7

State expenditure

31.0

31.0

28.2

27.1

26.6

State fiscal balance

-12.8

-13.4

-9.9

-5.0

-4.6

Overall fiscal balance 2

-18.4

-17.6

-14.3

-8.9

-8.4

 

(Billions of US$, unless otherwise indicated)

External sector

         

Exports

16.5

12.8

15.4

19.0

19.5

Of which: Oil and refined products

7.7

6.1

8.4

11.2

10.9

Imports

-15.7

-13.6

-16.1

-18.4

-18.9

Current account balance

-0.8

-1.5

-1.6

-0.9

-0.9

Percent of GDP

-2.4

-4.6

-4.5

-2.3

-2.1

Gross official reserves (end of period) 3

3.4

2.4

2.6

2.3

2.1

Months of imports 4

1.9

1.2

1.2

1.0

0.9

Months of imports (excluding crude oil imports) 4,5

2.3

1.5

1.5

1.2

1.1

Real effective exchange rate (percent change)

10.8

2.6

0.5

...

...

Sources: Bahraini authorities; and IMF staff estimates. 

1 Includes crude oil and gas. 

2 Includes State fiscal balance and Extra-budgetary expenditures.

3 Includes Special Drawing Rights and IMF Reserve Position.

4 Imports of goods and non-factor services for the following year. 

5 All imported crude oil is exported after refining.

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Earlier:

 BAHRAIN ENERGY FUND: $1 BLN
2018, May, 14, 10:45:00

BAHRAIN ENERGY FUND: $1 BLN

OGJ - Bahrain plans to raise $1 billion for energy investments in a fund the government calls unique among Gulf Cooperation Council countries.

 BAHRAIN'S NEW OIL
2018, April, 27, 10:45:00

BAHRAIN'S NEW OIL

AOG - Bahrain, recently announced that it had unearthed around 80 billion barrels of unconventional oil and up to 20 trillion cubic feet of tight gas off its west coast. The discovery could potentially transform the island state’s reserves which currently total well under 200 million barrels.

 BAHRAIN'S NEW OIL&GAS
2018, April, 2, 09:15:00

BAHRAIN'S NEW OIL&GAS

REUTERS - The new tight oil and deep gas resource is expected to contain many times the amount of oil produced by Bahrain’s existing oilfields, as well as large amounts of gas, BNA reported.

 IMF: BAHRAIN'S VULNERABILITY UP
2017, August, 28, 19:45:00

IMF: BAHRAIN'S VULNERABILITY UP

Bahrain’s fiscal and external vulnerabilities have increased in the wake of the oil price decline. Overall GDP grew 3 percent in 2016, supported by strong growth of 3.7 percent in the non-oil sector aided by the implementation of GCC-funded projects. Average inflation remained moderate at 2.8 percent. Bank deposit and private sector credit growth slowed. The banking sector remains well capitalized and liquid. Despite the implementation of significant fiscal adjustment, lower oil prices meant that the overall fiscal deficit reached nearly 18 percent of GDP and government debt rose to 82 percent of GDP. The current account deficit widened to 4.7 percent. International reserves have declined.

 GAZPROM & BAHRAIN LNG
2016, May, 5, 18:50:00

GAZPROM & BAHRAIN LNG

Russian state-owned oil and gas giant Gazprom is currently working to create a liquefied natural gas (LNG) distribution hub in Bahrain. The hub will be meant to intake LNG from various sources, including Russia.

 
 

 

 

 

Tags: BAHRAIN, OIL, GDP, ECONOMY

Chronicle:

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BAHRAIN'S GDP UP 3.2%
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NORWAY'S KEY PRIORITY

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BAHRAIN'S GDP UP 3.2%
2018, August, 15, 10:30:00

ALASKA LNG: $43 BLN

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BAHRAIN'S GDP UP 3.2%
2018, August, 13, 14:05:00

OIL PRICE: NEAR $73

REUTERS - Benchmark Brent crude oil LCOc1 was up 10 cents at $72.91 a barrel by 0930 GMT. U.S. light crude CLc1 was unchanged at $67.63 a barrel.

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