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Bahrains GDP

27 August 2014 By In Blogs

The Gross Domestic product of a country is one of the chief determinants of how healthy a country’s economy is. A high GDP means several sections of the economy are doing well; the citizens of the country have meaningful income and are able to spend their income to meet their needs and wants. This is simply because the GDP is a reflection of the total income or expenditure of the citizens of a country.


The history of Bahrain

There exists in the Persian Gulf an island without borders which forms the country of Bahrain. History speculates that Bahrain may have been the land for trade and a place where raw materials and copper existed in ancient Iraqi. The place had the name Dilmun. It is not exact though and may be in Qatar, the coasts of Iran or the Islands of Bahrain.

            The island was under the rule of Persia in the Fourth Century. It then became under Arab rule up to 1541 when the Portuguese invaded it. The country again came under the rule of Persia in 1602 up to 1783 when Ahmad Ibn al-Khalifah came into power. His family has been ruling the country to date. The country was colonized by Britain from 1820 until 1971 when it became fully independent (Lonely planet, n.d)

            The Sunni Muslims are the minority but controls the wealth and power of Bahrain as a country. This has made them have several conflicts with their counterparts in the country, the Shiite. In spite of all this, there have also been good steps taken by the country. After the death of Sheik Isa ibn Sulman al-Khalifah in 1999, his son took over and he has made several steps to promote democracy in the country. They even had a referendum in 2001 that gave women the opportunity to vote for the first time. The monarchy system has also undergone some transformation into the constitution with the first election of members of parliament taking place in 2002.

 Gross Domestic Product and its importance

            Gross Domestic Product (GDP) can be defined as the sum of the consumer and government spending and investments in addition to the exportation totals less importation values. This in essence, gives the total dollar value of the services and goods produced in a country in the market (Brezina, 2011).

            In measuring how healthy a country’s economy is, the Gross Domestic Product is one of the major pointers used. Two basic methods are used to measure GDP; the income method that adds up the earnings of all the people within one year or the expenditure approach in which all the expenditure for the year is added up. Both methods should arrive at answers that are close or equal to each other.

            A healthy economy, as represented by the GDP, translates to more employment opportunities and increase in the wages earned due to need for more labor by various sectors to sustain the economy. An upward or downward shift in the Gross Domestic Product also translates to a shift in the stock market. It is due to the changes that Gross Domestic Product translates in form of profits for companies leading to a rise or fall in the stock prices (Berezina, 2011).

Analysis of Bahrain’s GDP between 2003 and 2013

The economy of Bahrain has diversified in several ways. There has been improvement in transport and communication thus encouraging several multinational companies to carry out their businesses in Bahrain. These have enabled the country to make positive steps in the improvement of their Gross Domestic Product. Bahrain and the United States also signed a Free Trade Agreement in the year 2006, making it the first agreement of such a kind between United States of America and any state in the Gulf (Forbes, 2013).

            Oil still forms the backbone of the country’s economy. Bahrain’s exportation comes mainly from oil production and refining at sixty percent. Seventy per cent of the government income also comes from petroleum and makes up eleven per cent of the country’s Gross Domestic Product.

            Bahrain is also a top country in Islamic banking and its financial services comes in as the next major export service. In the second place after petroleum is construction, which majorly focusing on aluminum and petrochemical products.

            The country had stable growth rates in the Gross Domestic Product up to 2006 with its oil providing the backbone of the growth. Since then, the growth in the GDP has not been regular with seasons of fall and those of rise due to unrest in the country and several crises that have occurred in the global market. The majority of the population, being the Shiite, has had several protests claiming for more positions in the government and the military. The country is putting in place several policies with the aim of resurrecting a stable growth in the country’s GDP (Forbes, 2013).

            From the year 2003 to the year 2006, rises in oil prices resulted in an increase in the setting up of construction and property leading to a rise in the country’s economy. The Gross Domestic Product rose by 7.1% in 2004, 8.4% in 2005 and 9.4% in 2006. The economy still grew; even though at unstable rates in 2007 and 2008, having slight downward shifts. This was due to a slight shift in the country’s dominance of the oil market, its major contributor to the GDP.

            Between the years 2009 and 2010, there was a decline in the growth of the Gross Domestic Product caused by the downfall of oil prices in the world. There were also several worldwide financial crises during the same period that adversely affected Bahrain’s economy. To recover, the country is adopting several policies that have enabled it to diversify its economy and avoid overreliance on oil. Several advancements have been made in the industries of tourism and finance translating to the rise of the GDP again from the year 2011. In 2011, the industry of finance had a 27% contribution to the Gross Domestic Product.  The service industry’s hold in contribution to the Gross Domestic Product has also risen up to 41.5%. This helped in the stabilization of the economy after seasons of shifts in the global oil market (Forbes, 2013).

            There was another crisis experienced by the country towards mid 2012 translating to downward trends again in the Gross Domestic Product in 2013. The country experienced several protests from dissatisfied Shiite community demanding for more from the government that is seen to be more dominated by the minority Shia community. This led to military intervention, partly from other neighboring Arab states supporting the Shia, which brought deaths of several people. This had an adverse effect on the economy since it made some of the economic partners withdraw due to their fear of insecurity. The tourism and finance industries were adversely affected translating to low growths in the country’s GDP to just 4.6% down from 9.1%. The sector of real estate is one of the many that suffered due to the unrest, with concerns for insecurity leading to falls of between forty per cent and sixty per cent in the rates for rent and prices for land.

            The country has taken several steps to help in economic recovery and a continued upward trend of the GDP. There has been emphasis on construction of houses that are more affordable to revive the real estate sector that was affected between 2012 and 2013. The country has gotten several aids to help in this sector of the economy translating to about ten billion US dollars that should be distributed over a period of 10 years. The Housing Ministry has also entered into agreements with several banks so as to finance private developers of social housing for a population of about 50,000 citizens. This will most certainly attract domestic and foreign construction firms, which will help in boosting the GDP and the economy of Bahrain.

            The government is also taking steps to ensure more investment is made in the energy and basic utilities sector. There has been a lot of pressure on these with rising demands and consumption of water and power. The domestic power consumption alone has risen from 1540 Megawatts in the 2002 to more than 3000 Megawatts in the year 2013. To curb this pressure, the government has been looking for ways to boost more production of natural gas and try incorporating more renewable energy sources.

            The country may still experience political problems, but its continued approach to diversify its economy is a sure step of boosting a growth in its GDP.








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