There is that wonderful song from the Monty Python team, “Always look on the bright side of life.”
It is the song, economists must be listening to, when they gauge the nearly mid-year Bahrain economic performance. Good news from the Central Bank of Bahrain, welcoming court decisions, against the Awal
Bank appeal, following the 2009, CBB decision placing the bank into administration.
The London-based lawyers are working closely with the CBB on asset realisation and legal proceedings in a number of countries.
According to the CBB, Bahrain’s reputation as a sound place for investment, remains intact.
More good news, that S&P rating agency said Bahrain’s economy was expected to grow at a rate of 3.8 per cent, underpinned by a resilient non-hydrocarbon sector, the robust implementation of GCC-funded projects and strong activity in the financial, hospitality, and education sectors.
The fiscal deficit declined to 14pc, down from 18pc, of GDP.
But as with any car going forwards, there were also brakes!
There remains concern about the growth in public debt, to 89pc of GDP, and the current account deficit remains unchanged at 4.5pc and most significantly, Bahrain’s reserves remain low, covering only 1.5 months of prospective non-oil imports, at the end of 2017.
While Bahrain has forecast a more realistic oil-price expectation, there is still a strong hope that it will be the saviour of the economy.
Although the oil-price has risen slightly, the interest bill on public spending, “continues to increase, and a credibly large fiscal adjustment, is a priority.”
As always, Credit rating agencies, and the IMF in its latest report, continue requests for better targeting of subsidies, and the large wages bill.
And always calls for legal reforms to reduce the cost of doing business and improving the access for investment by small and medium enterprises.
Alas, Bahrain could give lessons in red tape, “which is always, supposedly, being slashed,” but much requires continuous culling.
Despite the protestations of bemoaning VAT nay-sayers, it is “incoming” finance for government coffers, the imposition of a VAT, although put off, yet again to 2019, will help fiscal imbalance.
The imposition of the VAT is projected to raise 1.8pc of GDP.
There are also suggestions, that a corporate tax income rate should be considered, and if it is kept reasonably low, international investors will “take it on the chin.”
Luddites seem to think Bahrain can live beyond its means forever and not pay off debt, because it only goes to venal overseas investors and major companies, are really rocks in the head “economists!”
When the dollar is weak, it is a good time to pay off debt, especially before the dollar rises, and if the US interest rate increases, as mooted, that drags along the tied Bahraini Dinar.
And predictions are that the “Government’s Debt stock” well rise to 100pc of GDP, by 2021.
An amber light, even if Bahrain has “weathered a number of economic storms.”