The Kingdom of Bahrain has witnessed a sustained growth of 5% in its real GDP over the past one decade, thanks to the attractive business climate and strong economic fundamentals.
A report issued by the Economic Development Board (EDB) identifies the role that economic, regulatory, and institutional reform played in the country’s strong economic growth between 2000-to-2011. The report also recommends policy initiatives to diversify and sustain growth momentum moving forward.
The paper, titled “Drivers of Economic Growth 2000-2011”, reviews the country’s strong growth performance in 2000-2011, when real GDP expanded by an annual average rate of 5%. The study attributes the positive momentum to the importance of economic, regulatory, and institutional reform in increasing the growth rate and creating an investment climate that enabled businesses to expand.
The paper’s findings state that the past decade saw the emergence of several “champion” sectors which significantly increased their GDP weight and maintained a positive momentum even after the onset of the global crisis. These included tourism, services, and telecommunications. By contrast, some other sectors, while key growth engines during the boom, proved highly vulnerable to the cyclical downturn. In many cases, their growth relied heavily on boosting low-cost labour inputs, which had a negative impact on labour productivity. The research argues that continuing the positive momentum of the past decade will require further efforts to boost human capital development, productivity, and innovation.
In terms of the key national income components – as per the study, growth in 2000-2011 was above all led by consumption and investment. While cyclical improvements in net exports had the largest impact on growth acceleration when they occurred, their underlying impact over the period as a whole was more modest. In the future, exports will drive growth in many sectors and are likely to increase in importance as companies expand beyond the confines of the national market into the regional and global spheres.
Bahrain’s growth performance was also shown to have low volatility in comparison to other emerging economies as a consequence of the Kingdom’s resilience to global economic shocks.
Strategic areas of focus that will serve to sustain growth momentum and capture emerging opportunities as the paper demonstrates include; the expansion of diversification initiatives, sector-specific strategic development initiatives and investment in high value-added areas and the development of export-oriented sectors to expand the market faced by companies, as well as boosting the efficiency of government expenditure and supporting the transition of small and medium-sized businesses to larger companies whilst fostering innovation.