It looks like Bahrain handled the setback caused by dipping oil prices rather well. The Central Bank of Bahrain (CBB) affirmed late last week that the Kingdom’s economy is in good shape and continues to enjoy robust support from a strong banking system.
According to the CBB’s data, Bahrain registered a 3.4% growth in the first half of 2017, which is marginally higher than the growth rate during the corresponding period a year prior (3.2%).
The non-oil sector, which played a big role in sustaining the positive growth outlook, saw an increase from 4% in H1 2016 to 4.7% in H1 2017.
Needless to say, the growth rate paints the government’s initiative to gradually adjust the fiscal imbalance in a good light. Equally impressive are the ongoing efforts to enhance the overall business, investment, and legal environment – especially so in the wake of lowering oil prices and a subdued regional growth.
Foreign direct investments (FDI) into the country also made a huge leap, registering a whopping $695 million as of Oct 2017. The FDI figure for this year kind-of dwarfs the corresponding figure from last year ($280 million). Among other things, this growth will further boost investors’ confidence in the resilience of the economy.
It is worth noting that despite a comparatively lower contribution by the oil sector (just about 20%), oil revenues topped the charts as the primary source of income in the state budget. The oil revenue is instrumental to the country’s growth as it helps the government meet the cost of imports, financial transfers, and remittances.
“Despite the current low oil price, the economy continues to grow with low inflation reflecting the Government’s ongoing initiatives to foster sound fiscal and economic policies,” the CBB said in response to Standard and Poor’s rating of the Kingdom of Bahrain, as reported by the News of Bahrain.
“Notwithstanding the rating agency’s action, the economic situation in Bahrain remains robust supported by a strong banking system,” it added.
(S&P’s credit rating for Bahrain currently stands at B+ with a stable outlook.)
The CBB also noted that Bahrain is committed to maintaining a fixed exchange rate regime with the US dollar. The central bank pointed out that this policy has so far served as a strong anchor for the country’s monetary policy and ensured success in creating financial stability alongside a stable business environment.