The Diverse Economy of the Kingdom of Bahrain

Bahrain’s economy is closely linked to the fluctuation in global crude oil prices as the rest of the region. However, its impact is much smaller compared to other Gulf countries due to the relatively diverse nature of the Bahraini economy. The economy of the island grew slightly by 1.8% in 2019 despite a sizeable contraction of the oil industry. According to the updated IMF forecasts from 14 April 2020, due to the outbreak of the COVID-19, GDP growth is expected to fall to -3.6% in 2020 and pick up to 3% in 2021, subject to the post-pandemic global economic recovery.

The major contributors of Bahrain’s economy are oil and natural gas which contributes around 85% of the country’s budget revenues. The fall in the energy prices in the last few years generated downfall in almost 10% of Bahrain’s GDP in 2017 alone. Even though the country had low foreign assets and fewer oil resources compared to its Gulf Corporation Council (GCC) countries, the diversified economy of the country had its ways to cover the deficit. The three main US credit agencies rated Bahrain’s sovereign debt to “junk” status in 2016, citing to the country’s high debt levels and persistently low oil prices. Despite the criticisms, the country was able to rise by 4$ billion issuing foreign currency-denominated debt in 2017.

Bahrain still focuses on discovering new natural gas supplies as feedstock to support its expanding petrochemical and aluminium industries. In 2018 the country was able to find a significant oil field off the country’s west coast paving the way for giant steps to extract oil profitably. Other economic activities of the country include the production of Aluminium, finance and construction sector. 

Despite the financial hardships, the Bahraini administration is facing the challenge of improving regional competitiveness. Particularly regarding the industry, finance, tourism and reconciling revenue restrictions with popular pressure to maintain generous state subsidies and a large public sector. Since 2015, the government lifted endowments on meat, diesel, kerosene, and gasoline and has started to phase significant expenses for electricity and water.

The following article analyzes how GDP, Industry, Agriculture and fishing, tourism, foreign trade and banking influences the Bahraini economy.

Gross Domestic Product (GDP)

According to the World Bank report, Bahrain’s Gross Domestic Production (GDP) in 2017, grew by 3.7% regardless of the contraction in the hydrocarbon sector. And the report shows a further decline in the Q1 oil sector by 14.7% in 2018, due to oil field maintenance. The other sectors such as large scale construction projects had grown by 1.9% during the same time period.

Also, the world bank report published in 2020, says that the overall growth will remain at an average of 2.1% in the period 2019-2020 and non-oil growth would slow down to 2.4%, due to front-loaded FBP fiscal measures and tapering megaproject investments.

The report emphasizes that growth will resume in outer years as efficiency gains from reforms materialize. Inflation is expected to increase to 3% in 2019-2020, given the imposition of the VAT in 2019 and additional proposed energy tariff hikes. Further, fiscal consolidation under the FBP would lower the fiscal deficit to an average of 8% of GDP in 2019-2020. 

However, the public debt will remain high, approaching 100% over the forecast period. The introduction of VAT and excise taxes would boost non-oil revenue by an average of 6.3% of non-oil GDP in the period 2019-2020.


The current industrial program in Bahrain was established in 1975, with the objective to diversifying the oil and natural gas products. The program succeeded in 2015 by rising the contribution of manufacturing to GDP by 17.4%. The government has established two new industrial complexes to facilitate the growth of local industry and attract foreign investment.

The aluminium industry is one of the monetary industry of the country which contributes to 12% of the current GDP. Bahrain continues to invest its industrial sector especially with 3$ billion expansion of Aluminium which would raise the production to 1.5 million tons per year and an increase of more than 500,000 tons.

Regardless of the fall in international oil prices this year, the country focuses on broadening its economy by the growth of heavy industries.

In the meantime, Bahrain continues to benefit from its oil and gas resources, with significant investment in the petrochemical sector. This incorporates the $5 billion spent on the ongoing development of the Bahrain Petroleum Company and the $515 million gas plant expansion by Bahrain National Gas Company.

Other major industrial sectors, such as food processing, garment manufacturing, engineering and handicrafts, are flourishing. According to the official sources the contribution of the industrial sector to GDP is 16%. 

 Agriculture and Fishing

The Food and Agriculture Organization of the United Nations (FAO) assessed the territory of agrarian land in Bahrain in 2016 as 8,600 hectares, representing more than 1.1 per cent of the kingdom’s region, of which 610 hectares are forests. In 2017, domestic agricultural products covered 25 per cent of the local market needs because of expanded production of more than 900 local farms, under a production and marketing plan developed by the government in 2013.

Palm trees occupy most of the cultivated area, trailed by tomatoes, wheat and onions. The World Bank evaluated the extent of labourers in the agricultural part at 0.97 per cent, 1.03 per cent and 1.05 per cent of the nation’s complete workforce in 2016, 2017 and 2018 respectively. 

The fishing industry, as indicated by the FAO, is based on traditional strategies following a prohibition on shrimp trawl fishing in 1998. Before that, nine boats with steel trawl nets worked in Bahrain’s waters. The boats were supposed to fish in waters deeper than 20 meters. Somehow, they regularly trawled in shallow waters, causing clashes with different fishers and bringing about their ban.

Bahrain’s marine waters have encountered a decrease in fish stocks for quite a few years. However, in the first decade of this millennium, restocking has become a normal practice supported by the previous Public Commission for the Protection of Marine Resources, Environment and Wildlife (presently the Supreme Council for Environment). During the past couple of years, the fishing sector has also begun to look for water recycling from farmed fish.

However, the contribution from agriculture to the GDP of the country increased to 9.13 BHD Million in the fourth quarter 0f 2019 from 8.89 BHD Million in the third quarter of 2019.


According to the Ministry of Industry, Commerce and Tourism, the total number of international visitors in 2018 was 10.3 million, an increase of 6 per cent compared to 2017. The number of nights in tourist accommodation was 9.8 million in 2018, an increase of 22.3 per cent compared to 2017. The amount of time spent in tourist accommodation also increased, from 2.4 nights per tourist in 2017 to 2.8 nights per tourist in 2018.

To raise the performance level in the tourism sector, the government established Vatel International Hospitality School in October 2018, which offers bachelor’s degrees in international hospitality management.

In the first nine months of 2019, tourists spent 10.7 million nights on Bahrain Island, which depicts an increase compared to the same period of 2018. 

Bahrain is home to a bevvy of tourist attractions and museums, as well as a rich history and three UNESCO World Heritage Sites, including Qal’at Al Bahrain.

Manama, the capital city of Island Bahrain was named as the “Capital of Arab tourism for 2020”, during the 22nd session for Arab Ministerial Council for tourism which was held in Saudi Arabia.

Due to the current COVID-19, concerns the country has taken several measures on travel restrictions, visa limitations and quarantine requirements which are impacting the economy of Bahrain and the globe in one way or another.

Foreign trade

According to the Customs Affairs Department, total non-oil exports in 2018 expanded by 7 per cent contrasted with 2017, because of the expansion in the value of non-oil exports by 9 per cent and the decline in the re-export of non-oil products by 2 per cent in 2018 compared with 2017. The non-oil export coverage ratio for total imports diminished by 3 per cent in 2018 compared to 2017.

Iron ore and its concentrates and aluminium wires and billets represented 57 per cent of all non-oil exports in 2018. Saudi Arabia was the biggest consumer of non-oil exports, trailed by the United Arab Emirates and the United States, representing 25.6 per cent, 11.8 per cent and 9.2 per cent respectively. 

The most significant imports in 2018 were cars, digital processing units and tobacco products. The government keeps up import links with an assortment of partners. China represented 12.8 per cent of the total imports, followed by the United States (8.7 per cent), the United Arab Emirates and Saudi Arabia (8 per cent and 7.4 per cent respectively).

According to the Bahraini foreign trade report for April 2020, the value of imports has reduced by 19% reaching BD362 million in April 2020 compared to BD448 million in April 2019.According to the report, China is ranked first in import to Bahrain, Saudi Arabia and Brazil second and third respectively.

The significant imports of 2019-2020 are Aluminium oxide with a total value of BD24.4 million, non – agglomerated iron ores and concentrates of BD24 million and four-wheel drive cars valued BD16 million.

The report summarized the trade balance, the difference between exports and imports recording a deficit totalling BD139 million April of 2020 compared to BD178 million of the same month of April 2019, depicting an improvement of the trade balance by 22%.


Bahrain has over 40 years of experience as a financial pioneer in the Gulf region. The banking sector consists of more than 400 local, regional and international financial institutions, which work in a sophisticated regulatory condition as per international best practices. The regulatory environment condition which is supervised by the Central Bank of Bahrain (CBB), which assists technological innovation in the banking sector and beyond providing the entrepreneurs with the chance to experiment and develop their ideas with real clients before being launched in the market. 

The banking system of the country is well adapted to continue non-oil growth and diversification of the economy. Assets and profits have risen in recent years, with listed banks recording strong lending growth. The percentages of delinquent and non-performing loans have diminished, even though the overall mortgage and credit card lending has risen.

Impact of COVID-19 

The government of Bahrain has set up a committed National Taskforce, associated ministries and authorities to combat the virus and to plan and implement strategies to handle the virus spread and its impact on the country’s economy.

Bahrain reports 12, 311 cases of COVID-19 cases and 19 deaths today on June 3rd. the national task force initiated and conducted random testing on the residents and expatriates and has set facilities for isolation and treatment.

Further, the government is supporting individuals and companies through a comprehensive US$11.4bn economic stimulus package in its aim to stabilize the economy.

By Jumana Jabeer


Related Posts

Leave a comment

You must be logged in to post a comment.