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- GDP (PPP):
- $66.9 billion
- 3.2% growth
- 3.9% 5-year compound annual growth
- $50,704 per capita
- Inflation (CPI):
- FDI Inflow:
Bahrain’s economic freedom score is 67.7, making its economy the 50th freest in the 2018 Index. Its overall score has decreased by 0.8 point, with declines in fiscal health, government integrity, the government spending indicator, and property rights outweighing improvements in business freedom and judicial effectiveness. Bahrain is ranked 4th among 14 countries in the Middle East and North Africa region, and its overall score is above the regional and world averages.
Of the six Gulf Cooperation Council (GCC) states, Bahrain has been the most affected by the political unrest since the Arab Spring in 2011, driven by long-standing complaints of the country’s Shia majority. In addition to a severe revenue problem caused by lower oil prices, the government faces the long-term challenge of boosting Bahrain’s regional competitiveness and reconciling revenue constraints with popular pressure to maintain generous state subsidies and a large public sector.
Ruled since the 18th century by the Sunni Al-Khalifa family as a British protectorate, Bahrain became an independent constitutional monarchy in 2002. In 2011, Shia political activists demanded a new constitution and greater political power. After modest concessions failed to stem the demonstrations and political violence, King Hamad bin Isa Al-Khalifa authorized a crackdown that was subsequently supported by GCC security forces. The government sought to ease tensions through a national dialogue led by the crown prince and by introducing law enforcement, intelligence, and judicial reforms, but protests and sporadic violence continued. Oil revenues support more than 80 percent of the government budget. A banking and financial services hub, Bahrain is the regional home for many multinational firms.
Bahrain’s legal system adequately protects and facilitates the acquisition and disposition of property. Expropriation is infrequent. The courts were used for political purposes in 2017, however, when the property of the last main opposition group was confiscated. The royal family appoints all judges. Government tendering procedures are not always entirely transparent, and contracts are not always awarded based on merit.
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. The overall tax burden equals 5.6 percent of total domestic income. Over the past three years, government spending has amounted to 33.4 percent of total output (GDP), and budget deficits have averaged 13.2 percent of GDP. Public debt is equivalent to 82.1 percent of GDP.
The economy is dominated by state-owned enterprises, although the government has a stated goal of increasing private-sector growth. The wage bill, which is nearly 12 percent of GDP, is among the highest in the GCC states. Due to slumping global oil prices, the government remains focused on reining in public spending by reducing subsidies for fuels, food items, water, and electricity.
Trade is extremely important to Bahrain’s economy; the combined value of exports and imports equals 156 percent of GDP. The average applied tariff rate is 3.3 percent. Nontariff barriers impede some trade. In general, government policies do not significantly interfere with foreign investment. Financial institutions account for over 25 percent of GDP. Foreign and domestic investors have access to modern financial services.