How Economic Growth Impacts Businesses in Bahrain

Economic Growth Impacts Businesses in Bahrain

Bahrain is a petite country, comprising an arrangement of several islands in the form of an archipelago. Since the times of antiquity, Bahrain has been the crossroads for major trade routes, a feature it worked upon due to its strategic location within the Arabian Gulf. Moreover, the archipelago nation sees the coasts of Saudi Arabia on the east and Qatar on the north, fuelling the economy with a synergy of commerce and trade derived from its neighbors. Bahrain is a tapestry of rich heritage, immortal civilization sites, oil supplies, a flourishing banking sector, tourism, quaint local towns and cities dotted with high rise skyscrapers. Over the last 10 years, Bahrain has been enjoying the reign of ever-increasing economic growth and an inclination in a new business setting up shop.

It is a known fact that thriving businesses are an indicator of a prosperous economy. And a booming economy is a gateway to booming businesses. We know the two are interlinked but we don't really know why. How does economic growth affect how businesses perform?

It's the dawn of 2019 and setting up a business in Bahrain has undergone a remarkable evolution, parallel to the growth of the economy.  With a meticulous look at the economic indicators, we begin to notice that the numbers speak volumes. "The numbers" I mentioned here, are in reference to the GDP of Bahrain, the rate of consumption, investment, exports and imports, fiscal balance, trade balance, and employment rate.

The Economy of Bahrain

Putting the Economy of Bahrain under the microscope, the GDP of Bahrain increased by 3.9%, despite a retrenchment of the oil sector and hydrocarbon sector. In terms of the US Dollar, the GDP that year was 35.2 Billion. The non-oiling sector saw a growth spurt of 1.9%. During its 10 year revamping process, 2017 saw a major decrease in the rate of unemployment by 3.7%, a very reprieving change since 2016, which saw an all-time high of 4.3%. The annual economic growth was 3.9%. The rate of inflation was a substantial 1.4%. The exports in 2017 were USD15.3 Billion, a number which is indeed lesser than what it was in 2015, but nonetheless a substantial growth since the preceding year, 2016, which was USD12.2 Billion. Imports in Bahrain also saw a similar change, a dip in numbers in 2016 an then a rebound by the end of 2017, USD16 Billon. A prediction we will have to wait and see. Alongside these economic indicators, the population of Bahrain increased by 1.4 Million to a steady 1.5 Million.

The Relation of the Economy and Businesses in Bahrain.

The closing stages of 2018 saw moderated economic growth in Bahrain. This can be compassed to the dimming down of mining and quarrying activities in Bahrain.  Nonetheless, mining in Bahrain averaged 564.21 BHD Million from the years 2010 to 2018. In the third quarter of 2017, it peaked at an all-time high of 630.83 BHD Million. A return to being proud of in 2017, after seeing a record low of 452.70 BHD Million in the second quarter of 2012. Fortunately, a surge in oil prices cushioned this fall and slowed down the deceleration. But moving on, the domino-like fall in oil prices hit a pause on the mining and quarrying industry and evidently impacted the performance of the economy in the fourth quarter. To buck up to compensate where it had lost, Bahrain opted for a financial aid package from the Gulf Cooperation Council to improve the nation's credit rating outlook from negative to stable in December 2018.

A Rapidly Growing Financial Forum

As far as the Middle East goes, Bahrain is the fastest growing financial hub, this was enabled due to free and open economic policies. Bahrain received global recognition from the World Bank for this very reason and titled its economy as high-income yielding. With the introduction of Islamic banking, Bahrain has turned into quite the banking hub for the Middle East.

Miscellaneous Income from Miscellaneous Sectors

The economy of Bahrain progressed due to the Government's collective effort to empower other sectors. Thus, Bahrain began generating income from other industries apart from its standard income industry, oil and gas. Encouragement of foreign as well as domestic investments led to a wave of new businesses springing up in every sector and industry. In fact, real estate has picked up tempo due to a change in tourism and the need for spaces.

The Omnipresence of Oil and Gas

Comprising of more than 60% of the total revenue, Bahrain continues to cash in through utilization of its abundant oil reserves. Since oil is considered to be the only valuable natural resource in the nation The, Bahrain succeeded in luring investment within infrastructural projects from other GCC countries to help raise the standard of living, housing, health, education, water, electricity, and road development.

Premier Free Trade Agreement

Bahrain took the pioneering decision to sign a free trade agreement with the United States of America, way back in 2005. Indeed a proactive move benefitting the nation today. The Agreement rendered the nation to become the first to sign a bilateral trade agreement with the States in the Arabian Gulf. Tariffs on imports and exports were waived off and diplomatic conditions imposed trade of goods and services were eliminated. Almost immediately, the flow and of foreign investment increased threefold, stimulating the economic growth copiously. Major sector and industries were also hit by an expansion, generating more jobs, establishing more businesses and driving economic growth in the compact country.

Not only has Bahrain's economy been identified as a modern economy, but it is also pillared by plentiful international and offshore businesses based in Bahrain. Moreover, with the introduction of the value-added tax launched on the 1st of January 2016 will help narrow the fiscal deficit and balance out the trade. In 2019, the economy is projected to gain momentum through mega-projects and a resuscitation of the oiling industry and further grow by 2.6%. By 2020 a 2.4% rise is expected, a prediction which we will have to wait and see.

Business Setup Worldwide is a platform which will help you set up a business in Bahrain backed by updated information and high-end knowledge on the latest business trends and changes in the business environment. From company formation to bookkeeping, we've got the know-how through our highly competent Advisors. To know more, contact us, we'd be happy to help!


What is the growth of tourism industry in Bahrain?

In terms of overall tourists, Bahrain welcomed two million visitors in 2020, placing it 71st globally.

How much revenue does Bahrain generate?

Bahrain generated around 724.00 million US Dollar in the tourism sector.

How much revenue does non-oil sector generate in Bahrain GDP?

79.2% of total GDP.

What is the annual GDP growth rate in Bahrain?

Averaged 3.17 percent from 2000 until 2022.

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