Preliminary government data shows that Bahrain’s economy experienced its fastest growth since 2013, with overall economic output increasing by almost 5 percent in 2021. The growth was mainly fueled by a 6.2 percent expansion in the non-oil sector, exceeding expectations set by the government’s recovery plan launched in 2021 in response to the COVID-19 pandemic. The hotels and restaurants industry was the strongest performer, followed by government services and then real estate.
In contrast, the oil economy shrank 1.4 percent last year due to a decline in production, according to the finance ministry. Neighbouring Saudi Arabia, however, experienced strong growth due to higher oil prices.
The International Monetary Fund predicts that Bahrain’s economy will grow by almost 3 percent in 2023, with no growth expected in oil GDP. Despite this, Bahrain’s high debt levels mean that it still relies heavily on energy prices to balance the budget. The IMF estimates that Bahrain would need an oil price of $122 per barrel this year, the highest among its neighbors but still far below current levels.
As a response to the pandemic’s economic impact, Bahrain postponed its target of balancing the budget by two years to 2024. The IMF forecasts a deficit of 6 percent of gross domestic product for the country in 2023.
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