Bahrain’s economy to grow at 3% this year says IMF

Bahrain’s economy is expected to grow at 3 per cent this year and 3.8pc in 2024, according to the IMF, with the main driver of growth shifting from oil to nonhydrocarbon activities in the kingdom as well as the rest of the GCC.

Revising the GCC growth outlook downwards in its latest Mena regional economic outlook released yesterday, the International Monetary Fund said economic expansion in the six-nation bloc is now expected to be 2.9pc as compared to the previous forecast of 3.6pc.

The main factor contributing to the lower oil GDP growth expectation this year is the Opec+ related curbs in oil production in which the bloc has announced its plans to cut 3.66 mbpd or 3.7pc of global supplies.

GCC real oil GDP growth is expected to fall to 1pc this year after witnessing an expansion of 12.4pc in the previous year.

Non-oil GDP, on the other hand, is estimated to grow faster at 4.2pc this year as against 3.7pc projected by IMF earlier.

“Oil exporters should carefully manage oil revenues, avoid expanding current expenditures, improve budget transparency, and strengthen medium-term fiscal frameworks,” commented Jihad Azour, Middle East and Central Asia director at IMF.

On the fiscal front, the IMF continues to forecast fiscal surpluses for the GCC region in 2023.

For the Mena region as a whole, the agency said growth is projected to decelerate this year, slowing to 3.1pc in 2023, before picking up slightly to 3.4pc in 2024.

This reflects the tight policies to restore macroeconomic stability, agreed Opec+ oil production cuts, and the fallout from the recent deterioration in global financial conditions, the IMF added.

In its commentary on the IMF report, Kuwait-based Kamco Invest notes that the year 2022 surprised on the upside with higher-than-expected GDP growth in a number of oil exporting and importing countries and as a result, GDP growth for 2022 was upgraded by 30 bps to 5.3pc as compared to 4.3pc in 2021.

The growth mainly reflected strong domestic demand despite the negative impact of inflation as well as a rebound in oil production in oil exporting countries.

The labour market in the region also showed improvement last year, especially in the GCC countries where employment rates increased, although outside the GCC unemployment rates remained a concern with minimal improvement and above the pre-pandemic levels.

Inflation is expected to remain persistent in the region, with estimating it will remain unchanged at 14.8pc before declining to about 11pc in 2024.

Kamco notes that inflation in oil exporting countries in the GCC has been relatively lower than their counterparts in the wider Mena region mainly due to subsidies, caps on certain products as well as the strengthening of the USD and the smaller proportion of food the consumer price indices of the GCC countries.