Bahrains Economy On Track, Says IMF

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Bahrain’s economy grew 1.8 per cent in 2018, and the International Monetary Fund (IMF) expects it to maintain the same pace this year.

The International Monetary Fund (IMF) has commended Bahrain’s sustained structural reforms, which are expected to support inclusive growth and further economic diversification.

The reforms introduced under the Fiscal Balance programme (FBP) are expected to further reduce the fiscal deficit over the medium term.

In a statement, the IMF stated that Bahrain’s introduction of a value-added tax (VAT) in January 2019 is a particularly significant step, as are plans for cost recovery in utilities and further means-tested subsidy reforms.

The Kingdom’s FBP is tied to the five-year financial aid worth $10 billion that Bahrain was secured last year in October from Saudi Arabia, the UAE and Kuwait to relieve pressure in currency and debt markets as well as adjusting its finances, which were hit by lower oil prices since 2014.

Additionally, higher oil prices in the last quarter of 2018, the reduction in utility subsidies and the new excise taxes helped reduce Bahrain’s overall deficit by 11.7 per cent of GDP, from 14.2 per cent in 2017.

The IMF also expects Bahrain’s banking system to remain stable. The Kingdom has been a leader in fintech in the GCC region, promoting opportunities while revising regulations and collaborating with other regulators.

 “Ongoing efforts at supervisory and regulatory vigilance, and to further enhance the AML/CFT framework, are welcome,” added IMF.

The structural reforms in Bahrain are expected to help support inclusive growth and further economic diversification, improve efficiency and catalyse private investment and improving access to financing for SMEs.