Relative to its economic output, Bahrain deployed the Gulf region’s biggest stimulus package
Like the rest of the world, pandemic had been the toughest for the Kingdom of Bahrain along with the low oil prices hitting the public finances. However, the Kingdom has announced that it could extend the duration of the support to aid business community from the impact of Corona pandemic.
Finance Minister, Sheikh Salman Bin Khalifa Al Khalifa said in an interview that the focus will be on gaining the pace of the projected recovery this year, rather than boosting revenue by raising taxes or fees.
Even the $10 billion support package pledged in 2018 by neighbouring states to support Bahrain economy couldn’t cover the shock due to pandemic. Yet, the Kingdom responded to the emergency situation by announcing a survival package of around 32% of its GDP (Source: S&P Global Rating). The package consisted mostly of lending liquidity, SME support and debt deferment.
Sheikh Salman said that the Government will do whatever is necessary to ensure a positive way forward and it will also be closely watching what its neighbouring states are doing to boost their revenue.
“We’re also keeping one eye on the economy, and looking at the economic impact or potential for economic impact for any new revenue-boosting measures,”. He said.
Other states in the region who had long relied on oil revenue has started exploring other sources of income, but Bahrain is yet to any further steps since implementing Value Added Tax (VAT) in 2019. Being the smallest country in GCC, Bahrain is expecting to run a budget deficit, at the same time has committed itself to contain its spending under control towards achieving their goal of a balanced budget by 2022.
The additional massive expenditure to mitigate Covid-19 impact on the economy is a hit on the finances of the State, however to balance the impact, Government took measures to hold spending elsewhere, thereby controlling cost than anticipated in budgets.
Bahrain is one of the first states to take swift response to the pandemic situation by adhering to strict hygiene measures and extensive testing. This has helped them to lift the movement bans and also reopen the market early. The country has till date done more than 2 million Covid tests and has also approved the Pfizer-BioNTech vaccine for use, the second country to do so after the UK.
According to International Monetary Fund, the Bahrain economy was expected to shrink 4.9 percent in 2020, with expansion of 2.3 percent in 2021. With all the aids and supports, the economic damage from the pandemic remains, which posts a hard challenge to the Government in achieving the 2022 balancing budget.
However, recovering crude oil prices and prudent steps taken by the Government has regained the confidence of investors and stakeholders and it can positively impact the Bahrain Economy in 2021.
Tass & Hamjit, with its presence in Bahrain, is committed to support SME sector specifically to regain their momentum and have a turnaround from the pandemic impact in Bahrain. We can also help businesses to avail Governmental support packages and other benefits announced. Reach out for more information.