Other BriefingsNon-Oil Sector Driving Bahrain’s GDP Growth: Data Released for 2023
Key non-oil sectors poised to drive GDP growth in Bahrain in 2024-2025 are hospitality, financial services, manufacturing, government services, transportation, and communication. These sectors contributed to Bahrain’s economic expansion last year despite the dip in the oil sector due to global price fluctuations.
By Arendse Huld
The year 2023 marked a significant chapter in Bahrain’s economic landscape, as detailed in the comprehensive Bahrain Economic Report from the Ministry of Finance and National Economy (MOFNE). Despite facing challenges, the nation demonstrated resilience and adaptability, showcasing notable developments across various sectors.
The country’s economy grew at a decelerated but steady pace in 2023, driven by a third year of strong growth and recovery in the non-oil sector and overcoming dips in the oil sector due to global oil price fluctuations.
Major contributors to GDP growth in Bahrain
Key sectors such as financial services, manufacturing, government services, transportation, and communication emerged as stalwarts, contributing significantly to GDP. Notably, the hospitality industry witnessed exceptional growth, buoyed by a surge in inbound tourism, reflecting Bahrain’s allure as a tourist destination.
While challenges persisted, particularly in the manufacturing sector and foreign trade, Bahrain’s economic fabric remained resilient.
Overview of Bahrain’s economy in 2023
According to the 2023 Bahrain Economic Report from MOFNE, in 2023, Bahrain’s GDP experienced a real growth of 2.4 percent, primarily driven by a 3.4 percent expansion in the non-oil sector, while the oil sector saw a decline of 2.4 percent. However, in nominal terms, GDP decreased by 2.7 percent due to a 14.5 percent decline in the oil sector, influenced by global oil price decreases. In Q4 2023, real GDP grew by 3.5 percent, with the non-oil sector expanding by 4.0 percent and the oil sector by 0.5 percent compared to Q4 2022.
Bahrain’s GDP reached an estimated BHD 13.66 billion (US$36.24 billion) in 2023, up 2.4 percent from the previous year. The non-oil sector grew by 3.4 percent year-on-year, while the oil sector fell by 2.4 percent year-on-year.
The Ministry of Finance and National Economy projects a 3 percent real GDP growth in 2024, primarily driven by a 3.8 percent growth in the non-oil sector, and a 3.8 percent real GDP growth in 2025, with the non-oil sector expected to grow by 4.5 percent.
The non-oil sector played a significant role, contributing 83.9 percent to GDP in 2023. Of these, the financial sector contributed the most value to the country’s GDP, accounting for 17.8 percent of GDP, followed by manufacturing13.6 percent, government services at 13.3 percent, and transportation and communication at 7.4 percent.
In 2023, the hotels and restaurants sector saw the highest growth of any sector at 8 percent year-on-year. This was driven by a 24.7 percent year-on-year increase in inbound tourism flows, with 12.4 million tourists arriving and total revenue growing 31.6 percent year-on-year to reach BHD 1.9 billion (US$5 billion).
The financial corporations sector grew by 5.7 percent, aided by positive indicators in electronic fund transfers and banking activities. Trade, real estate and business activities, transportation and communication, and construction sectors also experienced growth, albeit at varying rates.
In contrast, the manufacturing sector declined slightly by 0.4 percent, influenced by mixed performance among key players such as GPIC, Alba, and Bapco.
The oil sector contributed 16.1 percent to GDP in 2023, but experienced a decline “primarily due to maintenance activities at the Abu Sa’afa field”, Bahrain’s largest oil field, as well as global oil price decreases. Average daily oil production from the Abu Sa’afa field and the Bahrain field decreased, while natural gas production increased compared to 2022.
Foreign trade and investment
In 2023, Bahrain experienced a decline in both non-oil and oil exports, totaling BHD 4.67 billion and BHD 4.66 billion (US$12.39 billion) respectively, leading to a total export decline of 17.8 percent year-on-year to BHD 9.33 billion (US$24.75 billion).
Basic metals accounted for 57.2 percent of non-oil exports of domestic origin, the largest share, followed closely by mineral products at 17.9 percent of the total value and chemicals at 6.6 percent. Other major export categories included animal and animal products, as well as natural pearls, precious stones, semi-precious stones, and metals.
Saudi Arabia, the UAE, the US, the Netherlands, and Egypt were the primary partners for non-oil exports.
Merchandise imports decreased by 7.5 percent year-on-year to BHD 7.64 billion (US$20.27 billion) in 2023, due to the 18.6 percent decline in oil imports and 1.1 percent decline in non-oil imports. Mechanical and electrical equipment accounted for the largest share of non-oil imports at 19.8 percent, followed by chemicals at 15.4 percent and mineral products at 14. percent. Vehicles and transport equipment and base metals and related articles also contributed substantial amounts.
China, the UAE, Brazil, Australia, and Saudi Arabia were the top partners for non-oil imports, with China accounting for 14 percent of the total non-oil import value, followed by the UAE with 9.5 percent.
Services exports increased by 6.1 percent year-on-year in value to reach BHD 1.3 billion (US$3.45 billion), while primary income surged by 32.8 percent year-on-year to BHD 980.4 million (US$2.4 billion). However, workers’ remittances abroad decreased by 1.8 percent to BHD 1 billion (US$2.65 billion).
Meanwhile, foreign direct investment (FDI) into Bahrain rose in 2023, with inward investment increasing by 18.9 percent year-on-year to BHD 16.2 billion (US$42.98 billion). Total FDI flows surged by 147.8 percent year-on-year to BHD 2.6 billion (US$6.9 billion). Financial and insurance services saw the highest increase in FDI flows, receiving a total of BHD 2.7 billion (US$7.16 billion), followed by the wholesale and retail trade sector with BHD 29.9 million (US$79.33 million). Kuwait led in investment origin, followed by Saudi Arabia and the UAE.
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