IMF expects Bahrain economy to grow by 3.3% this year amid COVID-19 pandemic

TDT | Manama

The Daily Tribune – www.newsofbahrain.com

The International Monetary Fund (IMF) said that Bahrain‘s economic recovery from the COVID-19 pandemic will be gradual, projecting growth of 3.3% this year after a contraction of 5.4% in 2020.

The improvement in economy will coincide with an expected recovery of 3.9% in the non-oil sector, supported by the widespread distribution of vaccines to cushion the negative impacts of the coronavirus pandemic.

This was part of the preliminary findings made by IMF staff teams who visited the Kingdom of Bahrain to evaluate the country’s progress and future after the pandemic.

In a statement, Ali Al Eyd – head of the IMF mission – said: “The post-pandemic recovery will be gradual. Economic growth is projected at 3.3 per cent in 2021 and is expected to remain flat at around 3 per cent over the medium term.”

The IMF teams held virtual discussions from January 25 to February 11, 2021 to conduct the 2021 Article IV consultation.

The mission will submit a report to IMF management and Executive Board, which is scheduled to discuss the Article IV Consultation on March 17.

“Bahrain moved quickly to address the health and economic effects of the COVID-19 pandemic, protecting lives and livelihoods.

Swift and well-coordinated policy responses have helped limit the spread of the virus, deliver rapid and widespread access to vaccinations, and target income and liquidity support to those most in need,” said Al Eyd.

The country is suffering from the double shock of the coronavirus crisis and lower oil prices, which raised its overall fiscal deficit to 18.2% of GDP last year from a deficit of 9% in 2019.

Bahrain has accumulated debt since the oil price shock of 2014-2015.

A $10 billion Gulf programme helped it avoid a credit crunch in 2018.

The IMF said public debt rose to 133% of GDP last year from 102% in 2019.

“Once the recovery intensifies, there will be a need for an ambitious and growth-friendly fiscal adjustment set within a reliable medium-term timeframe to address the large imbalances in Bahrain, put the government debt on a steady downward path, and restore macroeconomic sustainability,” Al Eyd noted.

“The amendment will also help rebuild foreign reserves, strengthen the exchange rate peg, which still meets Bahrain’s needs as a pillar of monetary policy, and supports access to sustainable external financing.”