Bahrain’s economy ‘to grow 3.3pc this year’

MANAMA: Bahrain’s economy is projected to grow at 3.3 per cent, according to the International Monetary Fund (IMF).

The IMF’s mission chief for the country Ali Al Eyd said the post-pandemic recovery in the country will be gradual, with growth projected at 3.3pc in 2021 and around 3pc over the medium term.

“This outlook reflects a recovery in non-oil growth to 3.9pc in 2021 as widespread vaccine distribution boosts activity towards pre-crisis levels,” he said.

A statement issued after the IMF’s virtual consultations with the Bahrain government from January 25-February 11, quoted the official as saying, “Bahrain moved quickly to address the health and economic effects of the Covid-19 pandemic, protecting lives and livelihoods”.

He said the kingdom’s policy responses were swift and well co-ordinated, helping to “limit the spread of the virus, deliver rapid and widespread access to vaccinations, and target income and liquidity support to those most in need”.

In March last year, the government announced a comprehensive $11.4 billion (BD4.3bn) economic stimulus package to offset the impact of the coronavirus (Covid-19) pandemic on individuals and companies.

Last month, the GDN reported that the draft national budget for 2021 and 2022 projected revenues at BD2.285bn this year and BD2.339bn next year based on an oil price of $45 per barrel.

Recurrent expenditure is estimated at BD3.296bn this year and BD3.219bn next year.

The spending budget for projects is BD656 million for each year, including financing from the Gulf Development Fund.

The deficit, without interest calculation, is expected to reduce to BD568m this year and BD388m next year.

The total deficit is BD1.276bn for this year and BD1.145bn next year.

The IMF has acknowledged the government’s commitment to the Fiscal Balance Programme, which aims to achieve a balanced budget by the end of 2022.

Mr Al Eyd said, “Despite considerable challenges, the authorities remain committed to achieving the key objectives of the Fiscal Balance Programme, including gradually rebuilding policy buffers and reversing the rise in public debt.”

The IMF notes Bahrain’s near-term priority remains to ensure public health, essential services, and targeted fiscal support to the most vulnerable.

“Once the recovery firms, ambitious and growth-friendly fiscal adjustment set within a credible medium-term framework is needed,” said the official.

The adjustment, he said, would also help rebuild external buffers, solidify the exchange rate peg, which continues to serve Bahrain well as a monetary policy anchor, and support access to sustainable external financing.

According to Mr Al Eyd, targeted policies and structural reform efforts in the kingdom should aim at minimising economic scarring risks and creating post-crisis private sector opportunities.

“More flexible remote working policies could improve labour force participation, particularly among women and youth. Reducing the role of government as an employer could also help create a more dynamic and attractive private sector and alleviate fiscal pressures,” he added.

The IMF has also welcomed the Central Bank of Bahrain’s substantial support to banks.

“Maintaining a healthy banking system and fostering innovation in fintech and digital banking solutions will support the recovery and strengthen financial inclusion for underserved segments,” the international financial institution said.

Source: https://www.gdnonline.com/Details/935841