Bahrain’s economy to grow 3.5% next year says IMF

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Bahrain’s economy is projected to remain at 3 percent growth in 2024 but accelerate to 3.5 percent growth in 2025, supported by manufacturing and private sector credit expansion, the International Monetary Fund (IMF) has said.

The medium-term real GDP growth is projected at around 3 percent, driven by non-hydrocarbon GDP, which will account for close to 90 percent of the economy by 2029.

Inflation is expected to rise to 1.2 percent this year before gradually converging to 2 percent.

However, uncertainty and downside risks remain high, including potential escalation and expansion of regional conflicts, commodity price volatility and greater geo-economic fragmentation.

The IMF called for fiscal efforts to continue beyond the conclusion of the fiscal balance programme (FBP) this year to reduce government debt significantly over the medium term. The FBP target was set at 40 percent in 2023.

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Additionally, the fund urged the government to continue diversifying the economy, increasing private sector employment and further lifting female labour-force participation.

It also endorsed Bahrain’s exchange rate peg, calling it “an effective monetary anchor”.

Although the banking system remains well-capitalised, close monitoring of financial stability risks and improvements to macro-prudential tools were needed.

Climate mitigation policies, including gradually phasing out energy subsidies and additional investments in renewable energy, will help ease climate transition and create fiscal space, the IMF said.