Economic overview
The International Monetary Fund (IMF) expects Bahrain’s economic growth to stand at around 3.3% at the end of 2021, which is expected to remain constant (at around 3%) over the medium term. the important containment measures put in place by the government continue to have a profound impact on the Kingdom. The reduction in GDP in 2020 was estimated at around -5.4%, driven by a sharp contraction in the growth of the non-oil sector (-7%).
The private sector was the hardest hit sector, while the manufacturing sector remained relatively stable. The share of GDP related to hydrocarbons is estimated to have grown by 2%, while inflation has decreased by 2.3% in 2020. Due to the substantial fall in oil prices and the contraction in nominal GDP, the state budget deficit in 2020 it increased by 12.8%, compared to 4.7% recorded in 2019, while the overall fiscal deficit increased to 18.2% of GDP in 2020, a percentage which in 2019 amounted to 9%.
Public debt reached 133% of GDP, up from 102% in 2019. The current account deficit grew by 9.6% and foreign exchange reserves contracted sharply. “The post-pandemic recovery will be gradual. This forecast reflects a recovery of the non-oil sector equal to 3.9% in 2021, also thanks to the widespread vaccination campaign, which will push the resumption of activities towards pre-crisis levels.
However, there is considerable uncertainty regarding the forecast, mainly related to virus developments and domestic containment measures, ”the IMF said. Finally, the IMF praised the work carried out by banks in a complex situation such as that experienced by Bahrain in the last year. Preserving a healthy banking system and focusing on innovation in the sector of fintech and digital banking solutions will be the two elements supporting the country’s economic recovery and will strengthen the financial inclusion of the less well-off segments. (ICE Doha)
Main sectors of industry
Oil And Gas
Bahrain has had a petrol based economy beginning around 1937. Evaluations show it has around 124 million barrels of oil which is little contrasted with different individuals from the GCC. In any case, the oil and gas industry is the greatest business in Bahrain, representing 11% of the GDP and 70%-86% of government income. Out of this pay, 80% is from the Abu Safa seaward oilfield, possessed and oversaw by the Saudi Aramco, which moves half of its benefits to the Bahraini government. Bahrain gets the leftover 20% from Awali, the main oilfield in the country. Around 40% of the oil is devoured locally, and the rest is sent out.
Islamic And Offshore Banking
The Kingdom of Bahrain has one of the most complex financial ventures in the Arab world. It is the middle for Islamic money too the financial center point in the Persian Gulf. Starting at 2016, the Islamic financial area was worth more than $25.7 billion out of the business all out $192.7 billion. The business utilizes around 14,000 individuals and offers more than 25% of the nation’s GDP. Bahrain’s prosperity as a monetary center began with the ascent of the Persian Empire. Its essential area mostly in the Persian Gulf permitted Bahrain to turn into a significant exchanging focus.
Aluminum Smelting
The aluminum business in Bahrain has an expected $5.2 billion venture, 12,184 labor force, $1.7 billion commodity worth, and records for 12% of the nation’s GDP. Aluminum Bahrain (Alba) is the main player in the area and apparently one of the greatest aluminum smelters on the planet with an expected creation of more than 525,000 tons. About portion of the aluminum is traded to Europe, Australia, the US, the Middle, and the Far East, and Asia while the rest is offered to neighborhood downstream enterprises.
Iron Pelletization
Bahrain is prestigious for the creation of great Direct Reduction Iron Oxide Pellets. Bahrain Steel is the predominant organization in the business with two pelletizing plants which produce a consolidated 11 million tons of pellets every year. The iron pellets have a generous homegrown market and are popular in Saudi Arabia, Oman, Qatar, India, and South East Asia. Since Bahrain doesn’t have its iron metals or steel handling, it sends out steel, the unrefined substance, from Brazil, Chile, Sweden, and Norway.
Insurance
Bahrain has the littlest protection market in the GCC. Starting at 2016, the area gave about $0.74 billion, yet it is relied upon to develop by 7% up to $1.05 billion out of 2021. The business houses 36 protection firms, 25 nearby and 11 unfamiliar protection suppliers. No protection supplier holds over 10% of the portion of the overall industry. Alpen Capital predicts that presenting obligatory medical coverage will drive income and grow the protection business. Right now, the vast majority of the pay is gotten from the flourishing engine industry where there is an obligatory outsider engine protection.
Taxation for businesses
Bahrain’s tax system is based on Law No 22 of 1979. The system is very simple as the taxes owed by taxpayers are so minimal that there is no income tax system.
There is no personal income tax in Bahrain.
However, employers and workers must pay social security contributions as follows.
Employers must pay social security contributions covering old age, disability, death and unemployment in the amount of 12% of the salary for Bahraini employees, and 3% for expatriate employees for coverage on accidents at work.
In addition, companies with more than 50 employees must pay a contribution for the training of their employees in the amount of 1% of the salaries of Bahraini employees and 3% of the salaries of expatriate employees.
Workers, on the other hand, must pay social security contributions that cover old age, disability, death and unemployment in an amount equal to 7% of the salary for Bahraini employees, and 1% for expatriate employees that cover unemployment.
Investing in Bahrain
Bahrain was the best country in the Middle East and Africa area for attracting investments in the tourism sector in 2020, according to the annual report of the Fdi Intelligence, an international investment promotion company.
The report, reports the Gulf News, highlights that the sector in Bahrain has thus continued to grow and create jobs, despite the terrible year for tourism due to the covid. The main investments came from the United Arab Emirates with 492 million dollars in tourism from Emaar Properties and Eagle Hills, both active in the real estate and property development sector, in a year in which global investments in the Middle East and of Africa fell by 82% compared to 2019, with 1.6 billion dollars less. The global decline has obviously led to a collapse in tourism employment in the region from 17,400 seasonal places in 2019 to 2,800 in 2020.
Before the covid, Bahrain attracted about one million tourists a month with an average contribution of the sector to the GDP of 7%, thanks to a policy that has focused for years on the top sector, one of the main ones for diversifying economic activities from the country from oil. A strategy continued despite the explosion of the pandemic in which investments in progress continued for a total of over ten billion dollars, of which 1.1 billion are funds for the restructuring of the capital’s international airport.
Activism is being supported by tourism companies, with Edamah, the kingdom’s public company, announcing the construction of new tourism facilities, and the three international hotel groups Accor, Minor Hotels, and Hilton DoubleTree announcing the development of new hotels in a Bahrain that already hosts large international chains such as Four Seasons, Ritz-Carlton, Rotana, Intercontinental, Wyndham and Sofitel.
By focusing on high-level tourism, the country is favoring the growth of the five-star offer, concentrating at around 9,300 rooms for 2022, but also the growth of an average offer facing the sea.