Bahrain's Net Worth: A Country's Valuation Explored

Bahrain is a small Middle Eastern country with a population of 1,410,942 as of July 2017. It has a highly diversified economy, with strengths in financial services, ICT, manufacturing, logistics, and tourism. Bahrain's economy is the most diversified in the GCC region, and the country has the lowest establishment costs in the region. In 2022, Bahrain was the 77th largest economy in the world in terms of total exports and 98th in total imports. The country has a liberalised business environment, advanced infrastructure, and a supportive business environment. Bahrain's main exports are raw aluminium, refined petroleum, iron ore, aluminium wire, and aluminium plating. The country's GDP (PPP) in 2017 was $69.77 billion. However, there is a significant wealth disparity in Bahrain, with estimates suggesting that 12.2% of Bahrainis live on less than $5 per day. The ruling AlKhalifa family has been criticised for its lavish lifestyle and involvement in corruption scandals.

Bahrain's GDP and economic growth

Bahrain's economy is heavily dependent on oil and gas, with petroleum accounting for 60% of export receipts, 70% of government revenues, and 11% of GDP. In recent years, Bahrain has invested heavily in the banking and tourism sectors, with a particular focus on Islamic banking. Bahrain's finance industry is very successful, and the country was named the world's fastest-growing financial centre by the City of London's Global Financial Centres Index in 2008. Bahrain's banking and financial services sector has benefited from the regional boom driven by demand for oil.

Bahrain's GDP grew by 2.45% in 2023, with the non-oil sector showing a robust increase of 4.48%, indicating the country's successful efforts towards economic diversification. Bahrain's GDP in 2023 was $46 billion, with a GDP per capita of $28,698 compared to the global average of $10,589. Bahrain's economy recorded average annual growth of 2.8% in the decade to 2022, with an average real GDP growth of 2.9% over the last decade.

Bahrain's economy is the most diversified in the GCC region, with particular strengths in the financial services, ICT, manufacturing, logistics, and tourism sectors. Bahrain offers 100% foreign ownership in most of its thriving non-oil-based sectors. The country has a liberalised environment, advanced infrastructure, and industries open for investment. Bahrain is also a gateway to the GCC's $2.1 trillion trade market, making it an attractive location for businesses looking to expand in the region.

Bahrain's other major economic activities include the production of aluminium, which is the country's second-biggest export after oil, finance, and construction. Bahrain's success in diversifying its economy away from oil is evident in the fact that, despite a decline in petroleum output, the country's GDP still grew by 1.3% year-on-year in Q2 of 2024.

Oil and other exports

Oil is a major export for Bahrain, but the country has been trying to diversify its economy since the 1970s when it gained independence. In 2017, oil comprised 85% of Bahraini budget revenues, but the country has been developing its petroleum processing and refining, aluminium production, hospitality, retail, and banking sectors. Bahrain has also implemented a Free Trade Agreement with the US and plans to introduce a Value Added Tax.

In 2022, Bahrain was the 77th largest exporter in the world, with a total export value of $20.7 billion. The country's top exports are raw aluminium ($4.75 billion), refined petroleum ($4.3 billion), iron ore ($2.16 billion), aluminium wire ($729 million), and aluminium plating ($564 million). The country exports mostly to Saudi Arabia ($3.03 billion), the United Arab Emirates ($2.07 billion), the United States ($1.83 billion), Japan ($1.07 billion), and India ($928 million).

Bahrain's second-largest export after oil is aluminium, and the country is the world's biggest exporter of aluminium wire. In 2014, Bahrain exported $2.39 billion worth of services, including travel ($1.2 billion), transportation ($718 million), insurance services ($408 million), and other business services ($67.8 million).

Bahrain's economy is the most diversified in the GCC region, with particular strengths in financial services, ICT, manufacturing, logistics, and tourism. The country offers 100% foreign ownership in most non-oil sectors, and its workforce is highly skilled and motivated, with a good work-life balance. The government works closely with businesses to enhance the business-friendly ecosystem through policy reform.

However, Bahrain faces challenges such as addressing fiscal woes, boosting regional competitiveness, and reconciling revenue constraints with pressure to maintain state subsidies and a large public sector. The country has a high level of specialization in aluminium wire, stranded aluminium wire, raw aluminium, aluminium powder, and ammonia.

Government revenue and spending

Bahrain's economy is the most diversified in the GCC region, with particular strengths in the financial services, ICT, manufacturing, logistics, and tourism sectors. The country has a liberalised environment, advanced infrastructure, and industries open for investment. Bahrain also boasts the lowest establishment costs in the region, 100% foreign ownership, and a talented, motivated workforce.

In 2022, Bahrain was the 77th largest economy in the world in terms of total exports and 98th in total imports. The country exported a total of $20.7 billion worth of goods and services, with its main exports being raw aluminium ($4.75 billion), refined petroleum ($4.3 billion), iron ore ($2.16 billion), aluminium wire ($729 million), and aluminium plating ($564 million). Bahrain's main export partners are Saudi Arabia, the United Arab Emirates, the United States, Japan, and India.

In the same year, Bahrain imported a total of $15.4 billion worth of goods and services, with its main imports being iron ore ($1.61 billion), aluminium oxide ($1.15 billion), cars ($752 million), gold ($421 million), and gas turbines ($356 million). The country's main import partners are China, the United Arab Emirates, Brazil, Australia, and India.

Bahrain's budget revenues are largely derived from oil, which comprises 85% of government income. In 2017, low oil prices generated a budget deficit of at least $3.5 billion, nearly 10% of GDP. Bahrain has few options for covering this deficit due to its low foreign assets and limited oil resources compared to other GCC nations. In 2016, the country's sovereign debt rating was downgraded to "junk" status by the three major US credit agencies due to persistently low oil prices and high government debt levels. Despite this, Bahrain was able to raise about $4 billion by issuing international debt in 2017.

In terms of government spending, Bahrain has a history of funding lavish lifestyles for its ruling family, with a quarter of the nation's wealth going to the AlKhalifa family between 1926 and 1970. The family owns multi-million-dollar luxury goods, including a yacht and a fleet of aircraft. In addition, there have been allegations of corruption and a lack of transparency in government spending. For example, in 2014, it was reported that $40 billion worth of Bahraini public land had been given to private investors without any return payment to the state, and that public funds were used to finance land reclamation projects for commercial ambitions of the ruling family.

Economic corruption and transparency

Bahrain has a score of 42 on the Corruption Perceptions Index, ranking 76 out of 180 countries. The country's score has decreased by 2 points since last year, indicating a decline in its anti-corruption efforts. Bahrain's approach to fighting corruption has been described as "dysfunctional", with a largely reactive approach that undermines progress and good governance. The country's loss of momentum in addressing corruption is diminishing public trust.

Bahrain's economy is highly dependent on oil, which comprises 85% of its budget revenues. However, the country has faced challenges due to low oil prices, which contributed to a budget deficit of at least $3.5 billion in 2017, or nearly 10% of its GDP. Bahrain has limited options for covering this deficit due to its low foreign assets and scarce oil resources compared to its neighbours in the Gulf Cooperation Council (GCC).

In recent years, Bahrain has made efforts to diversify its economy beyond oil. It has developed its petroleum processing, refining, aluminium production, hospitality, and retail sectors. Additionally, Bahrain has sought to establish itself as a leading regional banking centre, particularly in Islamic finance. The country has also implemented a Free Trade Agreement (FTA) with the United States and plans to introduce a Value-Added Tax (VAT) to boost revenue.

Despite these efforts, Bahrain's economy remains vulnerable to fluctuations in oil prices. In 2016, the country's sovereign debt rating was downgraded to "junk" status by major US credit agencies due to persistently low oil prices and high government debt levels. However, Bahrain was able to raise approximately $4 billion by issuing international debt in 2017.

Bahrain's economic challenges are compounded by political instability and social unrest. The country has struggled to manage relations between its Sunni royal family and the Shia-majority population, with pro-democracy and reform protests occurring in 2011. Sporadic clashes between demonstrators and security forces continue, impacting the country's economic stability and growth.

In terms of economic complexity, Bahrain ranks 81st out of 96 countries, indicating a relatively low level of economic diversification. The country's top exports include raw aluminium, refined petroleum, iron ore, and aluminium wire, while its major imports are iron ore, aluminium oxide, cars, gold, and gas turbines. Bahrain's main export destinations are Saudi Arabia, the United Arab Emirates, the United States, Japan, and India, while its primary import partners are China, the United Arab Emirates, Brazil, Australia, and India.

Bahrain's economy compared to other GCC countries

Bahrain's economy is the most diversified in the GCC region, with particular strengths in the financial services, ICT, manufacturing, logistics, and tourism sectors. Bahrain has the fourth-freest economy in the Middle East and North Africa region and is the 40th-freest economy globally, according to the 2020 Index of Economic Freedom.

Bahrain's finance industry is very successful, with the country being named the world's fastest-growing financial centre by the City of London's Global Financial Centres Index in 2008. Bahrain's banking and financial services sector, especially Islamic banking, have benefited from the regional boom driven by demand for oil. Petroleum is Bahrain's most exported product, accounting for 60% of export receipts, 70% of government revenues, and 11% of GDP.

The country has also succeeded in attracting investment from other Persian Gulf states due to its advanced infrastructure and business-friendly ecosystem. Bahrain's economy grew by 2.45% in 2023, with the non-oil sector showing a robust increase of 4.48%, indicating the country's successful efforts towards economic diversification.

Bahrain's other major economic activities include aluminium production, finance, and construction. Bahrain is also a regional financial and business centre, with a successful tourism sector. The country has a talented and motivated workforce, a liberalised environment, and advanced infrastructure, making it an ideal entry point for businesses into the Middle East.

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