Bahrain: diversifying away from oil
Bahrain is the smallest economy in the Gulf Cooperation Council and together with Oman is considered to be a developing nation. This entitles it to funds from the Arab Fund for Social and Economic Development, an Arab version of the World Bank, which it needs. GDP growth will likely stay flat to slightly negative in the next two years. Most forecasts show shrinkage of between 0.5% and 1%. However, Bahrain has been the most active GCC country in diversifying away from reliance on oil. This now contributes just 46% of government revenue - it was 60% as recently as 1997.
In the next two fiscal years Bahrain is holding budget expenditure to 1998 levels of around $1.73 billion. Total revenue is projected to be $1.35 billion, some 10% less than the 1998 budgeted levels. As a result, departmental overheads are being reduced and all governmental programmes and expenditures are being reviewed.
However, despite the austerity budget, the government has pledged to increase recurrent spending on health, education, and social services by 4% this year and 5% next year.