COUNTRY FOCUS
Economic diversification in Bahrain Roberto Flammia, Local Partner, Dubai and Mostafa Elfar, Associate, Milan at BonelliErede, breaks down Bahrain’s current fiscal situation
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he Kingdom of Bahrain has long been dependent on its oil revenues to fund its budget and its public services. This is why the Bahraini government started intensifying efforts to diversify away from oil and gas back in the early 2010s, but this resulted in only a minimal increase in non-oil revenues. From 2014–2015, on the heels of a significant decline in oil prices, Bahrain’s oil-dependent economy started facing fiscal difficulties that hindered the balancing of its annual budgets and increased its debt-to-GDP ratio. The year 2016 onwards, the government implemented several reforms to adjust these fiscal imbalances. In particular, the economy appears to struggle to align non-oil government revenues with the economic growth of non-oil business relative to GDP. In other words, the diversification sought by government has indeed increased the contribution of non-oil business to GDP, but the non-oil revenues from that diversification have not increased at a similar rate.
“SIGNS STILL INDICATE THAT A BALANCED BUDGET BY 2022 MIGHT BE A LITTLE TOO OPTIMISTIC, UNLESS THE GOVERNMENT INTRODUCES ADDITIONAL MEASURES TO THOSE PROPOSED BY THE IMF.” Roberto Flammia
— Roberto Flammia, Local Partner, Dubai, BonelliErede
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BANKER MIDDLE EAST | APRIL 2020 | ISSUE 229
