The Kingdom’s government has announced a new national strategy for economic growth and fiscal balance. The multi-year plan is one of Bahrain’s most significant economic reform initiatives, with the goal being the improvement of the economy’s long-term competitiveness, as well as providing support to speed up the recovery following COVID 19.
The new five-pillar strategy, which is in alignment with Bahrain’s Economic Vision 2030 and the Kingdom’s intention of reaching net zero by 2060, consists of the following steps:
1. A new Labor Market Reform Plan, which includes a long-term National Labour Market Strategy, a review of labor fees, and a new Tamkeen Strategy (Bahrain’s public authority that supports private sector development) to continue upskilling Bahrain’s workforce. The program seeks to establish 20,000 Bahraini jobs and train 10,000 Bahrainis by 2024.
2. A Regulatory Reform Package, which incorporates the establishment of a new Government Land Bank, launching an online portal to showcase investment opportunities, introducing an online portal to digitize and simplify urban planning related services, and forming a new residency permit program to attract talent and investors. The package hopes to attract $2.5 billion in foreign direct investment by 2023.
3. A Strategic Projects Plan: catalyzing more than $30 billion in strategic project investments and establishing new industrial investment areas around the Kingdom.
4. Priority Sectors Plan: six new industry strategies will be applied across oil and gas, tourism, logistics, financial services, telecommunications, IT, and the digital economy, and manufacturing sector. By 2022, the new non-oil sector initiatives seek to support annual growth of 5%.
5. Fiscal Balance Program Update: The initiative aims to balance Bahrain’s budget by 2024, rather than the 2022 target set before COVID 19, with eight new fiscal reforms. This includes reducing recurrent non-manpower expenditure; reducing project spend; reducing manpower expenditure; streamlining the distribution of cash subsidies to citizens; increasing Government owned entities annual contributions; adjusting commodities prices and prices of services provided to companies; introducing new Government services revenue initiatives; and a VAT increase to 10%.
Following the announcement, His Excellency Shaikh Salman bin Khalifa Al Khalifa, Bahrain’s Minister of Finance and National Economy, commented:
“This comprehensive economic and fiscal plan is an investment in our nation’s people, our businesses, and the future of Bahrain.
“The swift healthcare and economic action taken by the government throughout COVID 19 secured the foundations of recovery, as evidenced by the real YoY growth of 5.7% in the second quarter of this year. The Kingdom is emerging from the pandemic with reasons to be highly optimistic and the plan announced today aims to turbocharge the recovery.
“The plan is also a concrete statement of our intent to secure a balanced budget by 2024 and provide long-term fiscal sustainability, with eight new spending and revenue initiatives complementing our broader economic competitiveness enhancements.”