Dubai: Bahrain’s economy is expected to grow around 1.8 per cent in 2019, the same pace as last year, the International Monetary Fund said late on Tuesday.
Bahrain was promised five years of aid worth $10 billion (Dh36.73 billion) in October from its allies Saudi Arabia, the United Arab Emirates and Kuwait, to relieve pressure on the kingdom in currency and debt markets.
It released a fiscal balance programme, tied to the financial aid and aimed at adjusting its finances, which were hit by lower oil prices in recent years.
The programme, together with the $10 billion in aid, “marks a major step in Bahrain’s reform agenda and has alleviated near-term financing constraints,” the IMF said in a statement following its recent visit to the country.
Despite the programme, Bahrain’s public debt rose to 93 per cent of gross domestic product last year, the IMF said, and it expects public debt to continue rising.
“Thus, additional reform efforts, anchored in a more transparent medium-term agenda, will be needed to ensure fiscal sustainability,” the IMF said.
Bahrain’s economy grew 1.8 per cent in 2018, and the IMF expects it to maintain the same pace this year. Last week, Bahrain’s central bank governor said he expected growth of 2 to 2.5 per cent this year.
“Economic activity was subdued in 2018. Oil output is expected to have declined by 1.2 per cent, while non-oil output growth decelerated to 2.5 per cent, driven by slowdowns in retail, hospitality, and financial services sectors,” the IMF said.
Bahrain’s budget deficit fell to 11.7 per cent of GDP last year from 14.2 per cent in 2017, partly because of higher oil prices, cuts in utility subsidies and new excise taxes, the IMF estimated.
Direct taxation, including a corporate income tax, could be considered to boost government revenues, the IMF said, but spending reforms should protect the most vulnerable members of the population.