From the outset it is worth noting that experts have cited Bahrain’s economy as being the least affected by the recent slump in oil prices. This is because, with the decrease in oil production over recent decades, Bahrain’s economy has been highly successful at diversifying away from dependence on oil. This is in comparison with a state like Kuwait, whose GDP is almost entirely dependent on oil prices.


Below we take a look at the outlook for several sectors of the Bahrain economy in 2015:


Key statistics


– Bahrain’s GDP during 2014 exceeded 4% (EDB) and is expected to be 3.9% in 2015 (IMF)

– The fastest growing sector of Bahrain’s economy during 2014 was construction; registering 12.3% annual growth during the 3rd quarter of the year (EDB)

– The number of Bahrainis entering the workforce grew by 8.4% during 2014 (EDB)

– Bahrain in 2014 was the highest ranking Arab state in Index of Economic Freedom (American Heritage Foundation)

– Bahrain was the second in the Arab world in 2014 (7th internationally) for issuance of licenses for investment projects (World Bank)

– Bahrain is fourth among Arab states (44th worldwide) for human development (UNDP); reflecting improving living standards and per capita GDP.

The macroeconomic picture


International economists have predicted that growth in Bahrain’s economy during 2015 will be almost entirely dependent on the non-oil sector. The IMF in late 2014 forecasted a 3.9% economic growth rate for Bahrain, in comparison with a relatively subdued 2.7% for the rest of the Middle East region.


Despite the reduced oil prices, the hydrocarbons sector in Bahrain continued to expand throughout 2014, with a 4.7pc year-on-year gain in the third quarter of the year. Meanwhile, during 2014 the commercial sector expanded by 4.6%; the retail sector by 4.4% and manufacturing by 4.1%.


National infrastructure & construction


One component of the predicted economic growth over the coming years is massive investment in infrastructure from budget allocations and the GCC, amounting to around $4.4bn for major projects to improve Bahrain’s economic and transport infrastructure. This is just one component of a five-year Government spending plan amounting to $22bn.


Substantial improvements to Bahrain’s airport and the planned construction of the GCC railway network, along with a second causeway to Saudi Arabia will tighten Bahrain’s connections to the wider region.

During the third quarter of 2014 the construction sector recorded growth of more than 12%, reflecting an impressive level of renewed dynamism in this sector, after a number of relatively subdued years following the 2008 global economic recession and the 2011 political crisis.


Government debt & Government spending


One of the major challenges for the new Government and Parliament will be managing rising levels of debt, particularly in the face of popular pressures for increasing spending across a variety of sectors to boost standards of living. Head of the Parliament Ahmed al-Mulla, has talked about the need for a “moderate and realistic” approach by parliamentarians towards the annual budget in the light of lower oil prices.


Ratings agency Moody’s said that while Bahrain faced various challenges, “including the limited scope for additional revenue generation and popular pressure to increase current spending; the government’s renewed commitment to reinforcing fiscal balances should lead to gradual improvement” in Bahrain’s debt position. Among the positive points cited by Moody’s was the return to profit of the government investment fund Mumtalakat.


– Government debt rose to $13.2bn, representing 44% of GDP at the end of 2013

– Higher spending during the 2013 fiscal year left Bahrain with a $1.1bn budgetary deficit.

– Some experts predict that government debt may rise to 50% during 2015.



After a series of difficult years, Bahrain’s banking sector is once again establishing itself as a regional hub and the destination of choice for investment and financial security; underpinned by a forward-looking and open regulatory system.


– The financial sector accounts for 16.7% of Bahrain’s GDP

– Bahrain’s banking sector grew by around 20% in 2014, amounting to $687m dollars

– Net profits totaled $953m for the first half of 2014

– Bahrain hosts 404 financial institutions

– Bahrain’s banking sector employs 14,000 people

– More than two-thirds of those who work in the banking sector are Bahrainis.

– Total banking assets amounted to around $200bn in Q3 of 2014.

Tourism, hospitality & leisure


Many economic experts look to the tourism and leisure sector as the area which will drive Bahrain’s growth for the foreseeable future, bringing in dependable levels of revenue and indirectly benefiting all other sectors of the economy. As we have seen, much of the investment in infrastructure and construction are geared towards tourism and hospitality.


– The hotel & restaurant sector experienced year-on-year growth of 7.4% in 2014

– The total number of visitors to Bahrain (by air & via causeway) was approximately one million during November 2014 (a 10% year on year increase)

Some of the new initiatives underway affecting the tourism sector include:


– New customs facilities are being designed for the Saudi causeway to facilitate access to Bahrain for tourists from the GCC. In the long term, a new causeway is to be build connecting Bahrain with Saudi Arabia and massive improvements are underway for Bahrain’s airport.

– Bahrain has approved a plan to create a shisha strip to the south of south of Sitra, to include around 40 cafes in a new complex, the first of its kind in the region.

– The new Bahrain Marina project is to include a five-star hotel, luxury apartments, waterfront villas, a new mall, entertainment facilities and a recreational waterfront area.

Grounds for optimism?


So, despite expectations that falling oil prices might further undermine a Bahraini economy that has been through troubled times over recent years; the outlook is moderately positive, with an expected growth rate of 4% for the foreseeable future which would put most European economies to shame.


The good news story would seem to be the resilience of Bahraini businesses and the impressive levels of investment going into key sectors of the economy that are set to drive future economic growth, like the hospitality sector.


The strong re-emergence of the banking sector is also a sign that the fundamentals of Bahrain’s business model remain sound.


(A major source for this analysis was the latest quarterly report by the Economic Development Board (EDB). Hyperlinks are provided for a number of other sources used within the text.)

Leave a Reply

Your email address will not be published.