IMF: Bahrain’s economy to grow by 3.3%

Bahrain’s economic recovery from the COVID-19 pandemic will be gradual, with growth projected at 3.3 percent this year after a 5.4 percent contraction in 2020, the International Monetary Fund (IMF) said on Sunday.

The tiny Gulf state has been battered by the twin shocks of the coronavirus crisis and lower oil prices, which pushed its overall fiscal deficit to 18.2 percent of gross domestic product last year from a 9 percent shortfall in 2019, the Fund said.

Bahrain has accumulated a large pile of debt since the 2014-2015 oil price shock. A $10 billion financial aid program from Gulf allies helped it avoid a credit crunch in 2018.

The IMF revealed that the “public debt increased to 133 percent of GDP from 102 percent of GDP in 2019.”

“Once the recovery firms, ambitious and growth-friendly fiscal adjustment set within a credible medium-term framework is needed to address Bahrain’s large imbalances, put government debt on a firm downward path, and restore macroeconomic sustainability,” the Fund said in a statement.

“The adjustment would also help rebuild external buffers, solidify the exchange rate peg, which continues to serve Bahrain well as a monetary policy anchor, and support access to sustainable external financing.”

“Bahrain moved quickly to address the health and economic effects of the COVID-19 pandemic, protecting lives and livelihoods. Swift and well-coordinated policy responses have helped limit the spread of the virus, deliver rapid and widespread access to vaccinations, and target income and liquidity support to those most in need,” according to the IMF.

“Economic growth is projected at 3.3 percent in 2021,” it added, an expected 3.9 percent recovery in the non-oil sector, boosted by widespread vaccine distribution.

The IMF also welcomed the central bank’s support for banks but warned about emerging credit risks amid weakened growth.

“Reducing the role of government as an employer could also help create a more dynamic and attractive private sector and alleviate fiscal pressures,” it said.

“What we are seeing today is still a race between the vaccine and the virus, and this will shape the recovery in 2021,” said Jihad Azour, director of the Middle East and Central Asia Department at the International Monetary Fund.

“We will have recovery across the board, but it will be divergent, uneven and uncertain,” he said, adding that accelerating vaccinations could improve growth outlooks by 0.3 percent -0.4 percent.

News Agencies