{
  "title": "IMF Executive Board Concludes 2021 Article IV Consultation with The Kingdom of Bahrain",
  "publication": "IMF News, March 22, 2021",
  "sourceUrl": "https://www.imf.org/en/news/articles/2021/03/22/pr2175-bahrain-imf-executive-board-concludes-2021-article-iv-consultation",
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  "summary": "Bahrain \"moved quickly to address the health, social, and economic effects of the COVID-19 pandemic, protecting lives and livelihoods.\"",
  "publishDate": "2021-03-22",
  "sections": [
    {
      "heading": "Pandemic response and immediate assessment",
      "content": "- Bahrain \"moved quickly to address the health, social, and economic effects of the COVID-19 pandemic, protecting lives and livelihoods.\"\n- Swift and well-coordinated policy responses helped:\n  - limit the spread of the virus,\n  - deliver rapid and widespread access to vaccinations,\n  - target income and liquidity support to those most in need."
    },
    {
      "heading": "2020 outcomes and near-term outlook",
      "content": "- Growth in 2020 is estimated at -5.4 percent.\n- Non-oil growth contracted by -7 percent in 2020, driven by marked contractions in high contact and job-rich services sectors.\n- Staff’s baseline scenario projects the twin deficit to persist over the medium-term, with public debt increasing to 155 percent of GDP by 2026.\n- Risks to the baseline are tilted to the downside and stem from:\n  - insufficient fiscal adjustment to contain the twin deficit,\n  - a tightening in global financial conditions,\n  - further declines in oil prices."
    },
    {
      "heading": "Fiscal developments and public debt",
      "content": "- With the plunge in oil prices and the contraction in nominal GDP:\n  - overall fiscal deficit increased to 18.2 percent of GDP in 2020,\n  - public debt reached 133 percent of GDP in 2020.\n- Authorities remain committed to the Fiscal Balance Program's objectives: gradually rebuilding policy buffers and reversing the rise in public debt, while maintaining essential social spending.\n- Executive Directors called for “urgent fiscal reforms to address the large imbalances, lower public debt, and restore macroeconomic sustainability.”\n- Directors recommended an “ambitious, credible and growth-friendly fiscal adjustment plan” over the medium-term, focusing on:\n  - domestic revenue mobilization,\n  - expenditure rationalization,\n  - protecting the most vulnerable.\n- Directors noted that additional consolidation measures beyond the current budget are needed to put debt on a firm downward path and reduce revenue dependence on hydrocarbon prices.\n- Further steps to improve fiscal governance and transparency were urged to reduce risks and enhance credibility of the fiscal plan."
    },
    {
      "heading": "External sector, reserves, and exchange rate",
      "content": "- The current account deficit widened to 9.6 percent of GDP in 2020.\n- International reserves declined to about 1.4 months of prospective non-oil imports in 2020.\n- Executive Directors agreed that the exchange rate peg “continues to serve Bahrain well.”\n- Directors emphasized that recommended fiscal adjustment should lead to a gradual unwinding of central bank lending to the government to rebuild external buffers and support the peg."
    },
    {
      "heading": "Banking sector and financial stability",
      "content": "- Banks remained well capitalized and liquid in 2020, though vulnerabilities may emerge:\n  - related to asset quality,\n  - and low profitability stemming from the crisis.\n- Directors welcomed substantial policy support to the banking system and urged:\n  - maintaining forward-looking analysis of bank credit portfolios and provisioning levels,\n  - careful management of sovereign-bank interlinkages."
    },
    {
      "heading": "Structural reform and diversification",
      "content": "- Directors welcomed the authorities’ structural reform agenda.\n- They called for continued efforts to minimize scarring and encourage economic diversification and private sector-led growth and employment."
    },
    {
      "heading": "Key statistics (selected indicators from Table 1)",
      "content": "- Real GDP (annual percentage change): 2018: 1.7; 2019: 2.0; 2020: -5.4; 2021 (proj): 3.3; 2022 (proj): 3.1.\n- Hydrocarbon (real annual percentage change): 2018: -1.3; 2019: 2.2; 2020: 0.7.\n- Non-hydrocarbon (real annual percentage change): 2018: 2.4; 2019: -7.0; 2020: 3.9; 2021 (proj): 3.7.\n- Consumer Price Index (period average): 2018: 2.1; 2019: 1.0; 2020: -2.3; 2021 (proj): 1.5.\n- Nominal GDP (BD millions): 2018: 14,158; 2019: 14,466; 2020: 12,748; 2021 (proj): 14,101; 2022 (proj): 14,635.\n- Revenue (percent of GDP): 2018: 21.9; 2019: 23.8; 2020: 17.8; 2021 (proj): 22.5; 2022 (proj): 21.0.\n- o/w Hydrocarbon revenue (percent of GDP): 2018: 16.3; 2019: 14.6; 2020: 9.8; 2021 (proj): 13.1; 2022 (proj): 11.9.\n- Expense (percent of GDP): 2018: 29.3; 2019: 28.8; 2020: 32.1; 2021 (proj): 27.5; 2022 (proj): 26.6.\n- Expenditure 1 (percent of GDP): 2018: 33.7; 2019: 32.8; 2020: 36.1; 2021 (proj): 31.7; 2022 (proj): 30.4.\n- Net lending (+) / Net borrowing (-) (percent of GDP): 2018: -11.8; 2019: -9.0; 2020: -18.3; 2021 (proj): -9.1; 2022 (proj): -9.4.\n- Government gross debt (percent of GDP): 2018: 95; 2019: 102; 2020: 133; 2021 (proj): 129; 2022 (proj): 134.\n- Goods Exports (US$ billion): 2018: 18.0; 2019: 18.1; 2020: 14.1; 2021 (proj): 18.6; 2022 (proj): 18.7.\n- of which : Hydrocarbon (US$ billion): 2018: 10.6; 2019: 9.9; 2020: 6.0; 2021 (proj): 9.2; 2022 (proj): 8.9.\n- Goods Imports (US$ billion): 2018: 19.1; 2019: 17.3; 2020: 17.2; 2021 (proj): 17.5.\n- Current account balance (US$ billion): 2018: -2.4; 2019: -0.8; 2020: -3.3; 2021 (proj): -1.5; 2022 (proj): -1.7.\n- Current account (percent of GDP): 2018: -6.5; 2019: -2.1; 2020: -9.6; 2021 (proj): -4.0; 2022 (proj): -4.2.\n- Official reserve assets 2 (in months of prospective non-oil imports): 2018: 2.5; 2019: 2.7; 2020: 1.3; 2021 (proj): 2.3; 2022 (proj): 1.4.\n- Broad money (annual percentage change): 2018: 11.1; 2019: 6.5; 2020: 2.8.\n- Real effective exchange rate: 2018: -3.4; 2019: ...\n\nIMF Communications Department — Press Release No. 21/75; March 22, 2021.\n\n---\n\n\n References\n\n- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg\n- The Executive Board\n- Kingdom of Bahrain and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\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/2021/03/22/pr2175-bahrain-imf-executive-board-concludes-2021-article-iv-consultation"
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    "Published: March 22, 2021",
    "Bahrain \"moved quickly to address the health, social, and economic effects of the COVID-19 pandemic, protecting lives and livelihoods.\"",
    "Swift and well-coordinated policy responses helped:",
    "Growth in 2020 is estimated at -5.4 percent.",
    "Non-oil growth contracted by -7 percent in 2020, driven by marked contractions in high contact and job-rich services sectors.",
    "Staff’s baseline scenario projects the twin deficit to persist over the medium-term, with public debt increasing to 155 percent of GDP by 2026.",
    "Risks to the baseline are tilted to the downside and stem from:",
    "With the plunge in oil prices and the contraction in nominal GDP:",
    "Authorities remain committed to the Fiscal Balance Program's objectives: gradually rebuilding policy buffers and reversing the rise in public debt, while maintaining essential social spending.",
    "Executive Directors called for “urgent fiscal reforms to address the large imbalances, lower public debt, and restore macroeconomic sustainability.”",
    "Directors recommended an “ambitious, credible and growth-friendly fiscal adjustment plan” over the medium-term, focusing on:",
    "Directors noted that additional consolidation measures beyond the current budget are needed to put debt on a firm downward path and reduce revenue dependence on hydrocarbon prices.",
    "Further steps to improve fiscal governance and transparency were urged to reduce risks and enhance credibility of the fiscal plan.",
    "The current account deficit widened to 9.6 percent of GDP in 2020.",
    "International reserves declined to about 1.4 months of prospective non-oil imports in 2020.",
    "Executive Directors agreed that the exchange rate peg “continues to serve Bahrain well.”",
    "Directors emphasized that recommended fiscal adjustment should lead to a gradual unwinding of central bank lending to the government to rebuild external buffers and support the peg.",
    "Banks remained well capitalized and liquid in 2020, though vulnerabilities may emerge:",
    "Directors welcomed substantial policy support to the banking system and urged:",
    "Directors welcomed the authorities’ structural reform agenda.",
    "They called for continued efforts to minimize scarring and encourage economic diversification and private sector-led growth and employment.",
    "Real GDP (annual percentage change): 2018: 1.7; 2019: 2.0; 2020: -5.4; 2021 (proj): 3.3; 2022 (proj): 3.1.",
    "Hydrocarbon (real annual percentage change): 2018: -1.3; 2019: 2.2; 2020: 0.7.",
    "Non-hydrocarbon (real annual percentage change): 2018: 2.4; 2019: -7.0; 2020: 3.9; 2021 (proj): 3.7.",
    "Consumer Price Index (period average): 2018: 2.1; 2019: 1.0; 2020: -2.3; 2021 (proj): 1.5.",
    "Nominal GDP (BD millions): 2018: 14,158; 2019: 14,466; 2020: 12,748; 2021 (proj): 14,101; 2022 (proj): 14,635.",
    "Revenue (percent of GDP): 2018: 21.9; 2019: 23.8; 2020: 17.8; 2021 (proj): 22.5; 2022 (proj): 21.0.",
    "o/w Hydrocarbon revenue (percent of GDP): 2018: 16.3; 2019: 14.6; 2020: 9.8; 2021 (proj): 13.1; 2022 (proj): 11.9.",
    "Expense (percent of GDP): 2018: 29.3; 2019: 28.8; 2020: 32.1; 2021 (proj): 27.5; 2022 (proj): 26.6.",
    "Expenditure 1 (percent of GDP): 2018: 33.7; 2019: 32.8; 2020: 36.1; 2021 (proj): 31.7; 2022 (proj): 30.4.",
    "Net lending (+) / Net borrowing (-) (percent of GDP): 2018: -11.8; 2019: -9.0; 2020: -18.3; 2021 (proj): -9.1; 2022 (proj): -9.4.",
    "Government gross debt (percent of GDP): 2018: 95; 2019: 102; 2020: 133; 2021 (proj): 129; 2022 (proj): 134.",
    "Goods Exports (US$ billion): 2018: 18.0; 2019: 18.1; 2020: 14.1; 2021 (proj): 18.6; 2022 (proj): 18.7.",
    "of which : Hydrocarbon (US$ billion): 2018: 10.6; 2019: 9.9; 2020: 6.0; 2021 (proj): 9.2; 2022 (proj): 8.9.",
    "Goods Imports (US$ billion): 2018: 19.1; 2019: 17.3; 2020: 17.2; 2021 (proj): 17.5.",
    "Current account balance (US$ billion): 2018: -2.4; 2019: -0.8; 2020: -3.3; 2021 (proj): -1.5; 2022 (proj): -1.7.",
    "Current account (percent of GDP): 2018: -6.5; 2019: -2.1; 2020: -9.6; 2021 (proj): -4.0; 2022 (proj): -4.2.",
    "Official reserve assets 2 (in months of prospective non-oil imports): 2018: 2.5; 2019: 2.7; 2020: 1.3; 2021 (proj): 2.3; 2022 (proj): 1.4.",
    "Broad money (annual percentage change): 2018: 11.1; 2019: 6.5; 2020: 2.8.",
    "Real effective exchange rate: 2018: -3.4; 2019: ...",
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    "[The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)",
    "[Kingdom of Bahrain and the IMF](http://www.imf.org/external/country/BHR/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
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    "[http://www.imf.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)",
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