2013 Index of Economic Freedom

Bahrain

overall score75.5
world rank12
Rule of Law

Property Rights55.0

Freedom From Corruption51.0

Limited Government

Government Spending72.4

Fiscal Freedom99.9

Regulatory Efficiency

Business Freedom75.8

Labor Freedom90.4

Monetary Freedom72.5

Open Markets

Trade Freedom82.8

Investment Freedom75.0

Financial Freedom80.0

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Quick Facts
  • Population:
    • 1.1 million
  • GDP (PPP):
    • $31.1 billion
    • 1.8% growth
    • 4.8% 5-year compound annual growth
    • $27,556 per capita
  • Unemployment:
    • 4.0%
  • Inflation (CPI):
    • 1.0%
  • FDI Inflow:
    • $780.9 million
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Bahrain’s economic freedom score is 75.5, making its economy the 12th freest in the 2013 Index. Its overall score has increased by 0.3 point due to score improvements in freedom from corruption and monetary freedom. Bahrain is ranked 1st out of 15 countries in the Middle East/North Africa region, and its economic freedom score is well above the world average.

As a regional leader in economic freedom, Bahrain sets a critical example for other countries in the Middle East and North Africa. Its transition to greater openness, diversification, and modernization is based on strong foundations of economic freedom. Firmly institutionalizing the rule of law by enhancing judicial independence and transparency will be critical to stamping out lingering corruption and ensuring success in this ongoing evolution.

Despite the challenging external and internal environments, Bahrain has maintained above-average levels of economic freedom in almost every measure. It remains a financial hub for dynamic economic activity, with high levels of trade and investment bolstered by a competitive and efficient regulatory environment.

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Background

Bahrain gained its independence from Great Britain in 1971 and became a constitutional monarchy in 2002. In 2011, Shia activists demanded a new constitution and greater political power. After modest concessions and efforts at dialogue failed to stem the demonstrations, King Hamad declared an emergency and authorized a crackdown supported by security forces deployed by Gulf Cooperation Council allies. The government has sought to ease tensions through a national dialogue led by the crown prince. Efforts have been made to reduce dependence on declining oil reserves and encourage foreign investment by diversifying the economy. Home to many multinational firms that do business in the region, Bahrain has a modern communications and transportation infrastructure and a cosmopolitan outlook, as well as a free trade agreement with the U.S.

Rule of LawView Methodology

Property Rights 55.0 Create a Graph using this measurement

Freedom From Corruption 51.0 Create a Graph using this measurement

The king holds some decision-making authority within the legal system, but the judiciary is generally well regarded and unbiased. Expropriation, especially without compensation, is infrequent, and private property is secure. Martial law was lifted after social unrest in 2011, but the departure in 2012 of several reformists from key posts at the planning agency and sovereign wealth fund signals the abandonment of some economic reform plans.

Limited GovernmentView Methodology

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 is equal to 3.9 percent of GDP. Expansionary government spending, in part to help quell social unrest, has reached 30.3 percent of total domestic output. Public debt remains below 40 percent of GDP.

Regulatory EfficiencyView Methodology

The regulatory framework is relatively streamlined. An updated Corporate Governance Code came into force in 2011. There is no nationally mandated minimum wage, but wage increases have exceeded overall productivity growth. It is unlikely that water and electricity subsidies will be maintained in the long term, but broader reforms and privatizations are likely to be delayed until after investor confidence is restored. Inflation is low.

Open MarketsView Methodology

Bahrain has a low average tariff rate and relatively few non-tariff barriers. There are no restrictions on repatriation of profits or capital, no exchange controls, and no restrictions on converting or transferring funds, whether associated with an investment or not. Bahrain’s diverse and competitive financial institutions account for over 25 percent of GDP. Foreign and domestic investors have access to modern financial services.

Country's Score Over Time

Bar Graph of Bahrain Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Bahrain to other economic country groups

Regional Ranking

rank country overall change
1Bahrain75.50.3
2Qatar71.30.0
3United Arab Emirates71.11.8
4Jordan70.40.5
5Oman68.10.2
6Israel66.9-0.9
7Kuwait63.10.6
8Saudi Arabia60.6-1.9
9Morocco59.6-0.6
10Lebanon59.5-0.6
11Tunisia57-1.6
12Yemen55.90.6
13Egypt54.8-3.1
14Algeria49.6-1.4
15Iran43.20.9


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