The Institute of Chartered Accountants in England and Wales (ICAEW) said that Bahrain’s economic outlook remains clouded by persistent weakness in government finances, evident by significant fiscal deficits and rising public debt levels, large external financing needs as well as a general slowdown in non-oil activity and limited prospects for oil sector growth.
Mohamed Bardastani, ICAEW Economic Advisor and Senior Economist for the Middle East at Oxford Economics, said, “Despite Bahrain having the most diversified economy in the GCC, 2019 has proven to be a challenging year amid low oil prices and a government financial overhaul.”
ICAEW stated that Bahrain’s oil revenues dominate government finances, comprising more than 70 per cent of government revenues with oil prices forecast at $67pb in 2019, it remains below the Kingdom’s estimated fiscal break-even point of $113, the highest among GCC peers.
In October last year, the government unveiled a fiscal balance programme that seeks to balance the budget by 2022 in an effort to rein in public spending, address large and persistent fiscal deficits and spiralling public debt.
ICAEW expects Bahrain’s fiscal balance programme to reduce the fiscal deficit from an estimated 10.1 per cent of GDP in 2018 to around seven per cent of GDP in 2019.
Bahrain secured a $10 billion support package from the UAE, Saudi Arabia and Kuwait which is expected to help the government address its financial shortcomings and support certain infrastructure projects, balancing the overall economic trajectory over the medium term.
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