VAT and oil revenue ‘will reduce Bahrain’s budget deficit’: report

VAT and oil revenue ‘will reduce Bahrain’s budget deficit’: report

MANAMA: Higher VAT and oil revenue will help to narrow Bahrain’s budget deficit to under 4 per cent of GDP this year as the fiscal reforms push continues, according to an assessment by Emirates NBD.

Authored by Khatija Haque, the banking groups’ head of research and chief economist, the report projects the kingdom’s GDP growth to accelerate to 4.1pc in 2022 as both oil and non-oil sectors rebound from the pandemic.

Bahrain’s economy grew 2.1pc year-on-year (YoY) in Q3 21, after recording rates of (-)2.8pc and 5.5pc in Q1-2021 and Q2-2021 respectively according to figures by the Finance and National Economy Ministry.

Growth during Q3-21 was led by the non-oil economy which expanded at 2.4pc in Q3-21. The oil sector contracted by 4.1pc YoY in Q3 21.

Emirates NBD has forecast 2021 GDP growth at 3.4pc following a contraction of 5.8pc in 2020.

However, the bank cautions that Bahrain’s Covid-19 dynamics may weigh on growth in Q1 2022 as the Omicron variant has caused case numbers to shoot up since early January.

The budget deficit likely narrowed to around (-)6.6pc of GDP in 2021 from (-)12.9pc in 2020.

“We expect the deficit to narrow further this year to (-)3.9pc of GDP as Bahrain continues to implement fiscal