However, the weakening of non-oil GDP growth to just 2.2 per cent in 2019, according to projections in the IMF’s October 2019 regional economic outlook – down from 2.5 per cent in 2018 and 4.9 per cent in 2017 – has demonstrated the challenges of implementing fiscal austerity in the non-oil driven economy.
The Ministers of Finance of the Kingdom of Saudi Arabia, the United Arab Emirates, the State of Kuwait…960 | the publication reaches you by | Bahrain News
Though oil GDP growth has returned to positive figures in 2019 – rising to 1 per cent, compared with -1.3 per cent in 2018 – this is not expected to hold in 2020 as market interpretations of supply and demand-side risks continue to weigh on global oil prices.
Part of the response from Manama appears to be a dilution of its efforts to rebalance its budget. While Bahrain’s fiscal deficit was reduced to 8 per cent in 2019, from 11.9 per cent in 2018, the IMF no longer expects the deficit to fall further by 2021, which makes the prospect of fiscal balance being achieved in 2022 unlikely.
Yet Manama’s balancing act appears to be working, as evidenced by the IMF’s projection of a recovery in non-oil growth to 2.5 per cent in 2020, and the stabilisation of overall real GDP growth at 2.1 per cent, despite the lower projections for oil-led GDP growth.
Amid rising public debt, navigating Bahrain’s tricky set of priorities is no mean feat. The government deserves credit for maintaining its focus on key areas of economy diversification. The re-emergence of Bahrain as a perceived gateway to Saudi Arabia also stands the economy in good stead.
Bahrain’s most recent oil discoveries are meanwhile not yet part of the equation, but if Manama can hold its current course, the government’s policies should serve to tide the economy over until its angel wealth arrives.
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