According to the International Monetary Fund, Bahrain has to do more to get its finances in shape, even if it manages to round up additional regional support.
Once it recovers from the economic downturn instigated by the coronavirus pandemic, the island nation will likely need “an urgent fiscal adjustment,” Ali Al-Eyd, the fund’s Bahrain mission chief, said in an interview with Bloomberg.
“Whether that counts with Gulf Cooperation Council support — which might help facilitate that adjustment — or not, that’s still the bottom line,” he said.
Even before the pandemic struck, the smallest Gulf nation was in financial distress, forced to shore up its finances with a $10 billion bailout package from wealthier neighbours in 2018.
According to IMF estimates, Bahrain’s budget deficit is expected to shrink by half this year after plummeting oil prices and the virus sent it widening to a record 18% of economic output in 2020. Going forward, though, it’s expected to start growing again until at least 2026.
The fund projects Bahrain’s economy will grow 3.3% this year, but that March estimate could be revised to account for the rebound in oil prices, Al-Eyd said.
Bloomberg confirmed that the Kingdom of Bahrain still needs someone to extricate it from its miserable economic reality and in light of its fragile financial situation.
The agency said that while most Gulf Cooperation Council countries are reviving their economy after the coronavirus lockdown repercussions. The smallest economy in the region, the Bahraini economy, still needs someone to help and rescue it.
Bahraini Leaks look at a report indicating that the financial breakeven price of oil for Bahrain must exceed $88 a barrel to balance its budget this year, according to the vision of the International Monetary Fund.
This is the highest breakeven rate in the six Gulf Cooperation Council countries and well above current levels of $75.
Bahrain is currently preparing to enter the international debt markets in the coming months to finance a deficit that is still rising in the wake of the Corona pandemic and lag behind its neighbours in the region, which is considered the largest in energy exports to the world.
Bloomberg quoted Scott Livermore, chief Middle East economist at Oxford Economics in Dubai, as saying: “Bahrain needs an ambitious reform aimed at addressing the large financial imbalances in its budget.”
However, he added, “But it seems that there is a lack of political will in this regard at present.”
The unemployment crisis in the Bahraini markets has deepened due to the outbreak of the Coronavirus and its disruption of the economic wheel in the country amid the absence of government solutions.
The situation is further complicated because the country’s economic indicators are witnessing a continuous decline, as prolonged government restrictions have caused the closure of dozens of commercial establishments and the layoff of thousands of workers, leaving them prey to unemployment.
This month, a picture circulated on social media platforms showed crowds of young men rushing to apply for jobs in a security company on Amwaj Island, forming a queue that reflects the dire economic situation that Bahrain has reached.