August 21, 2017
On June 5, 2017, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with the Kingdom of Bahrain.
", "publishDate": "2017-08-21", "sections": [ { "heading": "Overview", "content": "- On June 5, 2017, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with the Kingdom of Bahrain.\n- Press Release No. 17/331; published August 21, 2017.\n- Bahrain’s fiscal and external vulnerabilities have increased in the wake of the oil price decline.\n- Overall GDP grew 3 percent in 2016, supported by strong growth of 3.7 percent in the non-oil sector aided by the implementation of GCC-funded projects.\n- Average inflation remained moderate at 2.8 percent.\n- Bank deposit and private sector credit growth slowed; the banking sector remains well capitalized and liquid.\n- Despite significant fiscal adjustment, lower oil prices meant:\n - overall fiscal deficit reached nearly 18 percent of GDP,\n - government debt rose to 82 percent of GDP,\n - the current account deficit widened to 4.7 percent,\n - international reserves have declined." }, { "heading": "Macroeconomic outlook and projections", "content": "- Real GDP growth projections:\n - 2017: 2.3 percent\n - 2018: 1.6 percent\n - Drivers: ongoing fiscal consolidation and weaker investor sentiment.\n- Fiscal deficit projections:\n - 2017 overall fiscal deficit projected to improve to 12.2 percent of GDP owing to higher oil prices and continued reduction in spending.\n - Over the medium term, the fiscal deficit is projected to narrow only slightly because rising interest payments will offset some revenues from planned implementation of the VAT.\n- Current account:\n - Estimated to reach over 3½ percent of GDP in 2017 and projected to narrow gradually over the medium-term.\n- Note: Projections are based on a March oil price assumption of $55.2 per barrel in 2017." }, { "heading": "Executive Board assessment — vulnerabilities and priorities", "content": "- Directors’ overall view:\n - Economic activity and financial market conditions have remained positive, but fiscal and external vulnerabilities increased after the oil price decline.\n - An additional sizable and frontloaded fiscal adjustment is urgently needed to restore fiscal sustainability and reduce large fiscal and external financing needs.\n - Sustained fiscal efforts are needed over the medium term to put debt on a downward path and rebuild policy space.\n- Fiscal policy priorities recommended:\n - Contain current expenditure, including the wage bill.\n - Further reduce energy subsidies.\n - Raise non-oil revenue, including through the VAT and by exploring other revenue measures.\n - Minimize adverse impacts on vulnerable groups when implementing adjustment measures.\n - Strengthen revenue administration.\n - Establish a medium-term fiscal framework to support fiscal consolidation.\n - Implement a strong communication campaign to explain adjustment plans, strengthen public awareness and support, and maintain market confidence.\n - Put in place a comprehensive fiscal financing and debt management strategy to mitigate risks.\n - Recent steps to establish a public debt management office were welcomed." }, { "heading": "Exchange rate, reserves, and monetary/financial measures", "content": "- Exchange rate:\n - Directors agreed that the exchange rate peg remains appropriate for Bahrain, noting that it has delivered monetary policy credibility and low inflation.\n - To support the peg and strengthen international reserves, Directors said strong fiscal adjustment, sizable external financing, and structural reforms are needed.\n - Gradually raising interest rate differentials vis-à-vis the United States through stepped-up issuance of government securities could help discourage capital outflows and rebuild reserves.\n - Directors stressed the importance of discontinuing central bank lending to the government.\n- Reserves:\n - International reserves have declined (see Selected Macroeconomic Indicators for levels and months of imports)." }, { "heading": "Financial sector assessment", "content": "- FSAP results:\n - Banking sector appears well positioned to face moderate credit and liquidity shocks.\n - Recapitalization needs could be significant under a severe shock scenario.\n - Liquidity stress tests indicate most banks’ liquidity positions are relatively robust, but some wholesale banks and foreign branches hold few liquid assets.\n- Regulatory and supervisory priorities:\n - Directors welcomed central bank efforts to implement FSAP recommendations, including steps to introduce quantitative liquidity requirements for banks and to develop a macroprudential framework.\n - Additional needs: a clear legal mandate for financial stability, stronger risk-based supervision, and an enhanced crisis management and resolution framework.\n - These reforms will help support the financial sector." }, { "heading": "Structural reforms and data", "content": "- Directors commended authorities’ initiatives to streamline business regulation and improve the legal framework.\n- Recommended additional structural reforms to:\n - promote competition,\n - catalyze private investment, including by privatizing state-owned enterprises,\n - promote greater diversification.\n- Directors welcomed efforts to remove bottlenecks to support growth.\n- Data and statistics:\n - Recent improvements in financial sector data were welcomed.\n - Directors underscored the need to further strengthen economic statistics to support decision-making." }, { "heading": "Selected macroeconomic indicators (2012–2017, as presented)", "content": "- Production and prices (Percent change, unless otherwise indicated)\n - Real GDP: 2012: 3.7; 2013: 5.4; 2014: 4.4; 2015: 2.9; 2016: 3.0; 2017 (Proj.): 2.3\n - Real oil GDP1: 2012: -8.5; 2013: 15.3; 2014: -0.1; 2015: -0.6\n - Real non-oil GDP: 2012: 7.1; 2013: 3.1; 2014: 4.7; 2015: 3.6; 2016: 3.7\n - Nominal GDP (billions of US$): 2012: 30.7; 2013: 32.5; 2014: 33.4; 2015: 31.1; 2016: 31.9; 2017 (Proj.): 34.2\n - Consumer price index (period average): 2012: 2.8; 2013: 3.3; 2014: 2.7; 2015: 1.8; 2016: 1.3\n- Fiscal variables (Percent of GDP, unless otherwise indicated)\n - State revenue: 2012: 26.4; 2013: 24.6; 2014: 25.0; 2015: 18.2; 2016: 17.7; 2017 (Proj.): 22.6\n - Of which: oil revenue: 2012: 23.0; 2013: 21.4; 2014: 13.8; 2015: 12.1; 2016: 14.7\n - State expenditure: 2012: 28.2; 2013: 27.6; 2014: 28.4; 2015: 31.0; 2016: 30.9; 2017 (Proj.): 30.6\n - State fiscal balance: 2012: -1.8; 2013: -3.0; 2014: -3.4; 2015: -12.8; 2016: -13.2; 2017 (Proj.): -8.0\n - Overall fiscal balance2: 2012: -5.5; 2013: -9.7; 2014: -1.6; 2015: -18.4; 2016: -17.8; 2017 (Proj.): -12.2\n - Change in broad money (percent): 2012: 4.1; 2013: 8.2; 2014: 6.5; 2015: 1.2; 2016: 1.5\n- External sector (Billions of US$, unless otherwise indicated)\n - Exports: 2012: 23.1; 2013: 25.6; 2014: 23.5; 2015: 16.5; 2016: 12.8; 2017 (Proj.): 12.8\n - Of which: Oil and refined products: 2012: 7.9; 2013: 10.3; 2014: 9.0; 2015: 8.8; 2016: 6.7; 2017 (Proj.): 7.0\n - Imports: 2012: -19.7; 2013: -21.3; 2014: -19.8; 2015: -15.7; 2016: -13.6; 2017 (Proj.): -14.9\n - Current account balance (Percent of GDP): 2012: 8.4; 2013: 7.4; 2014: 4.6; 2015: -2.4; 2016: -4.7; 2017 (Proj.): -3.6\n - Gross official reserves (end of period)3: 2012: 5.2; 2013: 6.1; 2014: 3.4\n - Months of imports4: 2012: 2.2; 2013: 1.9; 2014: 1.1\n - Months of imports (excluding crude oil imports)4,5: 2012: 3.2; 2013: 4.0; 2014: 1.4\n - Real effective exchange rate (percent change): 2012: 10.7; 2013: ...\n- Sources: Bahraini authorities; and IMF staff estimates.\n- Notes provided in the original content:\n - 1 Includes crude oil and gas.\n - 2 Includes State fiscal balance and Extra-budgetary expenditures.\n - 3 Includes Special Drawing Rights and IMF Reserve Position.\n - 4 Imports of goods and non-factor services for the following year.\n - 5 All imported crude oil is exported after refining.\n\nIMF Executive Board Concluding Statement, June 5, 2017.\n\n---\n\n\n References\n\n- The Executive Board\n- PRESS CENTER\n- http://www.imf.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2017/08/21/pr17331-bahrain-executive-board-concludes-2017-article-iv-consultation" } ], "bullets": [ "[Markdown version](/en/news/articles/2017/08/21/pr17331-bahrain-executive-board-concludes-2017-article-iv-consultation/index.md)", "[Structured JSON version](/en/news/articles/2017/08/21/pr17331-bahrain-executive-board-concludes-2017-article-iv-consultation/index.json)", "[Bundle manifest](/en/news/articles/2017/08/21/pr17331-bahrain-executive-board-concludes-2017-article-iv-consultation/bundle-manifest.json)", "Published: August 21, 2017", "On June 5, 2017, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with the Kingdom of Bahrain.", "Press Release No. 17/331; published August 21, 2017.", "Bahrain’s fiscal and external vulnerabilities have increased in the wake of the oil price decline.", "Overall GDP grew 3 percent in 2016, supported by strong growth of 3.7 percent in the non-oil sector aided by the implementation of GCC-funded projects.", "Average inflation remained moderate at 2.8 percent.", "Bank deposit and private sector credit growth slowed; the banking sector remains well capitalized and liquid.", "Despite significant fiscal adjustment, lower oil prices meant:", "Real GDP growth projections:", "Fiscal deficit projections:", "Current account:", "Note: Projections are based on a March oil price assumption of $55.2 per barrel in 2017.", "Directors’ overall view:", "Fiscal policy priorities recommended:", "Exchange rate:", "Reserves:", "FSAP results:", "Regulatory and supervisory priorities:", "Directors commended authorities’ initiatives to streamline business regulation and improve the legal framework.", "Recommended additional structural reforms to:", "Directors welcomed efforts to remove bottlenecks to support growth.", "Data and statistics:", "Production and prices (Percent change, unless otherwise indicated)", "Fiscal variables (Percent of GDP, unless otherwise indicated)", "External sector (Billions of US$, unless otherwise indicated)", "Sources: Bahraini authorities; and IMF staff estimates.", "Notes provided in the original content:", "[The Executive Board](http://www.imf.org/external/np/sec/memdir/eds.aspx)", "[PRESS CENTER](http://presscenter.imf.org/)", "[http://www.imf.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)", "[https://www.imf.org/en/home](https://www.imf.org/en/home)" ], "alternates": { "markdown": "/en/news/articles/2017/08/21/pr17331-bahrain-executive-board-concludes-2017-article-iv-consultation/index.md", "json": "/en/news/articles/2017/08/21/pr17331-bahrain-executive-board-concludes-2017-article-iv-consultation/index.json", "bundleManifest": "/en/news/articles/2017/08/21/pr17331-bahrain-executive-board-concludes-2017-article-iv-consultation/bundle-manifest.json" }, "generatedAtUtc": "2026-09-25T21:09:04.654Z" }