Bahrain flag Bahrain: Economic and Political Overview

The economic context of Bahrain

Economic Indicators

Bahrain's economy is closely linked to the fluctuation in global crude oil prices as the rest of the region. However, its impact is much narrower compared to other Gulf countries due to the relatively diverse nature of the Bahraini economy. Bahrain experienced strong growth in 2022 (+4.9%); however, growth moderated to 2.7% in 2023, driven by non-oil GDP expanding by 3.3%, attributed to fiscal consolidation, increased interest rates, and a base effect from strong growth in 2022. Going forward, GDP is expected to pick up to 3.6% in 2024 and 3.2% the following year, on the back of higher energy prices, easing monetary policy, and stronger export growth (IMF). Private consumption is poised to remain the primary growth driver, constituting approximately 40% of GDP, buoyed by alleviating inflationary pressures. However, notable uncertainty persists in the forecast, stemming from factors such as oil price fluctuations, international financial instability, ongoing tightening measures, and a potential slowdown in global growth.

In 2023, Fitch projected that the general government budget deficit would narrow to 4.9% of GDP, down from 5.9% in 2022. Despite a decline of approximately 3% in oil revenue, revenues were expected to increase. Fitch also forecasted a similar trend for 2024, projecting a budget deficit of 3.4% of GDP. The authorities aimed for a balanced budget with an oil price of USD 60 per barrel in 2024, a considerable reduction from the USD 105 fiscal breakeven oil price in 2022. According to Fitch, the budget for 2023-24 outlined a credible strategy for substantially enhancing the non-oil balance. This strategy encompassed increased revenues from newly implemented and revised taxes and fees, augmented revenues from gas sales achieved through enhanced collection methods and higher volumes, as well as elevated dividends from state-owned enterprises (SOEs). Despite robust fiscal reform efforts and a reduction in budget deficits, the debt-to-GDP ratio rose to 121.2% in 2023, up from 117.6% the previous year. Also, thanks to the positive impact of subsidies, inflation decreased in 2023, averaging an estimated 1%, following a 3.6% rate in 2022 (IMF). Over the forecast horizon, inflation is expected to remain between 1.4%-1.8%.

Being a small country, Bahrain relies heavily on the foreign workforce. In the second quarter of 2023, total employment reached 770,129 workers. Foreign workers' employment accounted for 609,028 workers by the quarter's end, marking an 8.1% annual increase. Meanwhile, Bahraini employment stood at 161,101 workers, reflecting a slight annual decline of 0.2% (data Labour Market Regulatory Authority). According to the latest figures available from the IMF, unemployment stood at 5.4% as of end-2022. Overall, Bahrain has a high GDP per capita (PPP), estimated at USD 61,248 in 2022 by the World Bank.

Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 44.3844.6746.7948.7350.73
GDP (Constant Prices, Annual % Change)
GDP per Capita (USD) 28,78228,26228,87629,33729,796
General Government Gross Debt (in % of GDP) 116.9124.6126.0128.7131.8
Inflation Rate (%)
Unemployment Rate (% of the Labour Force)
Current Account (billions USD) 6.842.833.242.581.67
Current Account (in % of GDP)

Source: IMF – World Economic Outlook Database, October 2021

Main Sectors of Industry

Bahrain counts a labor force of more than 844,000 out of its 1.46 million population. The contribution of agriculture to Bahrain's economy is negligible due to a scarcity of fertile lands, low rainfall, and the small size of the country. In 2022, its share of the GDP was 0.3% - one of the lowest shares in the world - and employed 1% of the labor force (World Bank, latest data available). Date palm cultivation and the pearl industry used to account for a considerable share of the economy prior to the development of the oil industry. As per the Ministry of Municipalities Affairs and Agriculture, there was a significant increase of 36% in agricultural production in the nation, with output reaching almost 13,000 tonnes in 2022 compared to 2015 figures. This growth can be credited to various factors such as the expansion of greenhouses, a larger workforce, and improvements in agricultural techniques.

Employment in industry amounts to 35% of the workforce, a rate that has been stable since 2010. The share of the primary sector in the national economy stands at 47.9% (World Bank), and revolves around aluminum, petrochemicals, and food processing. The Alba aluminum shelter is one of the largest in the world, producing more than 2% of global output and 15% of Bahrain's GDP (NBK Bahrain). Overall, the manufacturing sector is estimated to account for one-fourth of GDP, while oil rents cumulate 10.9% (World Bank). As a small non-OPEC Gulf oil producer with around 124.6 million barrels of proven reserves, Bahrain derives its oil revenues from two fields: the onshore Bahrain field and the offshore Abu Safah field, which it shares with Saudi Arabia.

The services sector employs 64% of the workforce, a rate that has declined since the early 2000s, and accounts for 47.9% of the economy (World Bank). Bahrain's financial sector plays a preeminent role among Gulf countries and contributes significantly to the local economy: the financial corporations are one of the largest non-oil sectors contributing to the real GDP by 18.08% (official governmental figure). The banking sector includes 30 retail banks (13 locally and incorporated and 17 foreign banks’ branches), 61 wholesale banks, and 8 representative offices of overseas banks (data Bahrain Association of Banks). Other major services sectors include telecommunications and transportation. Tourism is another important sector of the economy, and the country attracts almost 10 times its resident population in a given year.

Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 1.0 34.9 64.1
Value Added (in % of GDP) 0.3 47.9 47.9
Value Added (Annual % Change) 4.4 1.2 4.9

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.


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Indicator of Economic Freedom


The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

World Rank:
Regional Rank:

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation


Business environment ranking


The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

World Rank:

Source: The Economist Intelligence Unit - Business Environment Rankings 2021-2025


Country Risk

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Sources of General Economic Information

Ministry of Finance and National Economy
National Oil and Gas Authority
Statistical Office
Bahrain Open Data Portal
Central Bank
Central Bank of Bahrain
Stock Exchange
Bahrain Bourse
Economic Portals
Arabian Business

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Latest Update: April 2024