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- GDP (PPP):
- $61.9 billion
- 4.7% growth
- 4.0% 5-year compound annual growth
- $51,714 per capita
- Inflation (CPI):
- FDI Inflow:
Despite the challenging external and internal environments, Bahrain has maintained economic resilience and continues to be a regional leader in economic freedom. It remains a financial hub for dynamic economic activity, with high levels of trade and investment bolstered by a competitive and efficient regulatory environment.
Economic Freedom Snapshot
- 2016 Economic Freedom Score: 74.3 (up 0.9 point)
- Economic Freedom Status: Mostly Free
- Global Ranking: 18th
- Regional Ranking: 1st in the Middle East/North Africa Region
- Notable Successes: Regulatory Efficiency, Fiscal Freedom, and Financial Freedom
- Concerns: Rule of Law
- Overall Score Change Since 2012: –0.9
The kingdom’s challenging transition to greater openness, diversification, and modernization continues. Firmly institutionalizing the rule of law by ensuring judicial independence and transparency will be critical to stamping out lingering corruption and safeguarding stability. Youth unemployment remains a major long-term economic challenge.
Bahrain has been a constitutional monarchy since 2002. In 2011, Shia activists launched a campaign demanding a new constitution and greater political power. When modest concessions and efforts at dialogue failed to stem the demonstrations, King Hamad bin Isa Al Khalifa authorized a crackdown that was subsequently supported by Gulf Cooperation Council security forces. The government has sought to ease tensions through a national dialogue led by the crown prince and by introducing law enforcement, intelligence, and judicial reforms. The government encourages investment in non-energy sectors such as finance and construction to reduce dependence on declining oil reserves. Home to many multinational firms that do business in the region, Bahrain has a modern communications and transportation infrastructure and a free trade agreement with the U.S.
The Sunni Muslim ruling family appoints all judges, and the judicial system is seen as corrupt. Expropriation is infrequent, however, and private property is secure. Bahrain has some anti-corruption laws, but enforcement is weak, and high-ranking officials suspected of corruption are rarely punished. The king’s uncle, who is also prime minister, is a hardliner who has opposed reforms demanded by the country’s Shia majority.
Bahrain imposes no taxes on personal income. Most companies are not subject to a corporate tax, but a 46 percent tax is levied on oil companies. Other taxes include a small stamp duty and a new tax on property purchases. Overall tax revenue equals 3.1 percent of GDP. Government spending amounts to 28.6 percent of total domestic output. Public debt equals slightly more than 40 percent of GDP.
The regulatory framework is relatively streamlined. There is no nationally mandated minimum wage, but wage increases have exceeded overall productivity growth. A March 2015 IMF report estimated that Bahrain’s subsidy programs covering natural gas for industrial users, food items, water, and electricity consume more than 12.5 percent of GDP.
Bahrain has a 3.7 percent average tariff rate. State-owned enterprises and sectoral limits on foreign investment distort the economy. Non-tariff barriers are relatively low. Bahrain’s diverse and competitive financial institutions account for over 25 percent of GDP. Foreign and domestic investors have access to modern financial services.