Bahrain’s economy is expected to grow around 1.8 percent in 2019, the same pace as last year, the International Monetary Fund said late on Tuesday.
Bahrain was promised five years of aid worth $10 billion in October by Saudi Arabia, the United Arab Emirates and Kuwait, to relieve pressure on the kingdom in currency and debt markets.
It released a fiscal balance program, tied to the financial aid and aimed at adjusting its finances, which were hit by lower oil prices in recent years.
The program, together with the $10 billion in aid, “marks a major step in Bahrain’s reform agenda and has alleviated near-term financing constraints,” the IMF said in a statement following its recent visit to the country.
Rising public debt
Despite the program, Bahrain’s public debt rose to 93 percent of gross domestic product last year, the IM said, and it expects public debt to continue rising.
“Thus, additional reform efforts, anchored in a more transparent medium-term agenda, will be needed to ensure fiscal sustainability,” the IMF said.
Bahrain’s economy grew 1.8 percent in 2018, and the IMF expects it to maintain the same pace this year. Last week, Bahrain’s central bank governor said he expected growth of 2 to 2.5 percent this year.
“Economic activity was subdued in 2018. Oil output is expected to have declined by 1.2 percent, while non-oil output growth decelerated to 2.5 percent, driven by slowdowns in retail, hospitality, and financial services sectors,” the IMF said.
Bahrain’s budget deficit fell to 11.7 percent of GDP last year from 14.2 percent in 2017, partly because of higher oil prices, cuts in utility subsidies and new excise taxes, the IMF estimated.
Direct taxation, including a corporate income tax, could be considered to boost government revenues, the IMF said, but spending reforms should protect the most vulnerable members of the population.