Economic activity in Bahrain was subdued in 2018 and is expected to remain at about 1.8 percent this year, according to the International Monetary Fund (IMF).
The IMF described the introduction of value added tax (VAT) in January as "a particularly significant step", as are plans for cost recovery in utilities and further means-tested subsidy reforms.
It added that the Fiscal Balance Program (FBP), accompanied by $10 billion in regional support, marks a major step in Bahrain’s reform agenda and has alleviated near-term financing constraints.
The IMF noted that oil output in Bahrain is expected to have declined by 1.2 percent, while non-oil output growth decelerated to 2.5 percent, driven by slowdowns in retail, hospitality, and financial services sectors.
Continued implementation of GCC-funded projects has supported growth in the construction sector, with inflation edging up to 2.1 percent, mainly driven by higher food and transport prices.
With higher oil prices, the reduction in utility subsidies, and the new excise taxes, the overall deficit in 2018 fell to 11.7 percent of GDP, from 14.2 percent in 2017, the IMF added.
Arabian Business reporters Shruthi Nair and Shayan Shakeel discuss Bahrain's economy on this edition of Inside AB.
(Source: Arabianbusiness.com YouTube channel)