Bahrain inflation drops to 13-month low in March

Price rise or inflation in Bahrain dropped to a 13-month low in March this year, owing to a combination of persistent high oil and gas prices, the interest rates hikes and the decline in global food prices.

The latest assessment by Kuwait-based Kamco shows that the monthly year-on-year inflation rate in Bahrain during March 2023 reached its lowest level since December 2021 at negative 0.1 per cent, down sharply from 3.9pc in March 2022.

The softening of Bahraini’s inflation rate was mainly due to the contraction of five out of the 11 sub-indices in the general consumer price index (CPI).

Bahrain’s clothing and footwear sub-index witnessed the largest contraction among other sub-indices at negative 11.7pc followed by alcoholic beverages sub-index which witnessed a y-o-y contraction of 5pc in March 2022.

In terms of expectations, the kingdom has the IMF’s second lowest projected inflation rate among the GCC countries at 2.2pc in 2023 and in 2024.

In context, Bahrain witnessed an average inflation rate of 3.6pc in 2022.

On the other hand, the IMF has pencilled in a growth of 3pc for the kingdom’s real GDP in 2023 and 3.8pc in 2024.

Comparatively, Bahrain’s real GDP has expanded 4.2pc in 2022.

For the GCC region as a whole, inflation remained relatively low in 2022 despite averaging higher than estimates in 3.3pc as compared with annual estimate of 3.1pc, according to the IMF’s Regional Economic Outlook.

Moreover, the IMF expects GCC inflation to fall in the next two years estimating an average of 2.9pc in 2023 and 2.3pc in 2024.

Lower inflation in GCC countries is mainly attributed to governmental intervention such as price caps on certain products, subsidies on key products or utilities and the strengthening of the US dollar which all GCC countries have pegged to their currencies except for Kuwait which has linked the Kuwaiti dinar to a basket of currencies including the US dollar.

Another key driver of the decline in inflation is the decline of global food prices.

In terms of sectoral inflation trends, the food and beverages subcategory has been one of the most important categories in terms of weight or growth in GCC inflation performance.

The subcategory has showed growth in all the GCC countries except the UAE which has not yet released its monthly inflation stats.

The food and beverages CPI subcategory for Kuwait recorded a y-o-y monthly growth of 7.5pc in March 2023 followed by Bahrain with growth of 4.8pc during the month.

Among the GCC countries, inflation growth in the Housing subcategory was mixed albeit leaning to positive y-o-y growth during March 2023.

Bahrain’s housing prices contracted by 2.1pc during the month.

In terms of the communication subcategory, the picture was still mixed.

Both Bahrain and Qatar recorded negative growth or decline in costs in their communications inflation rate at negative 2.5pc and negative 4.8pc y-o-y during March 2023, respectively.

In the education subcategory, GCC inflation growth has also been on a declining trajectory.




Share this page Share on FacebookShare on TwitterShare on Linkedin

Read our latest publication

'Bahrain-France Investor Guide' -
is YOUR guide to invest in Bahrain and in France. Click here to view the online guide