The Bahrain Economy
Bahrain is an island country located in Western Asia, in the Persian Gulf. It comprises a small archipelago of 50 natural and 33 artificial islands. The islands comprise 83 percent of the country’s landmass. The country’s economy relies on the oil and gas industry and tourism. Its population is over four million.
The Government of Bahrain has undertaken a series of reforms in an attempt to boost its economy. The first step is to increase the amount of foreign direct investment that the country receives. It has sought to attract $2.5 billion in foreign direct investment by 2023. The government has also introduced cost-rationalisation measures and raised its value-added tax to 10 per cent in a bid to balance the budget by 2024.
Bahrain’s traditional industries include building dhows, fishing, pearling, and manufacturing reed mats. A large shipyard operates on Al ‘Azl Island. The country also has several light industries, such as the production of building materials and consumer goods. The government has invested in modern industries, such as an aluminum rolling mill, which opened in 1986 and now manufactures door frames.
Despite the high cost of oil, Bahrain’s balance of payments has improved over the past few years. Increasing revenues in the service sector and rising oil prices bolstered the country’s balance of payments. As a result, Bahrain’s current account balance has registered surpluses in 2004 and 2003, compared with deficits in 2002 and 2001. The country’s gross international reserves have increased from US$1.4 billion in 2001-2003 to US$1.6 billion in 2004.