21-05-2025
Bahrain's budget focuses on economic development
Bahrain's 2025-26 budget strategically balances fiscal discipline with a strong commitment to economic growth driven by its thriving non-oil sectors, according to a new report.
In its latest GCC Budget Update analysis, Kuwait-based Kamco Invest notes that the kingdom's forward-looking budget follows a robust 2.6 per cent real GDP growth in 2024, reaching BD15.13 billion, propelled by a significant 3.8pc expansion in non-oil activities.
The Finance and National Economy Ministry projects this positive momentum to continue, with real GDP expected to grow by 2.7pc in 2025, underpinned by a healthy 3.4pc growth in non-oil activities.
While the budget projects a deficit of BD1.5 billion ($3.9bn) in 2025, with expenditures rising to BD4.4bn and revenues at BD2.9bn, the government has reached an eight-point agreement that includes maintaining VAT rates while adjusting selective taxes on certain items.
The 2026 outlook projects a reduced deficit of BD1.1bn, with expenditures at BD4.5bn and revenues at BD3.5bn, including BD1.8bn from non-oil revenues.
The budget underscores a strong focus on social welfare and development. It ensures the continuation of cost-of-living allowances for pensioners and allocates an unprecedented BD800 million for housing projects, marking the largest investment in this sector in the country's history, according to the Bahrain News Agency.
Furthermore, BD688m are earmarked for healthcare investment. Significant expenditures for 2025 include BD91.7m for General Public Services, BD81.1m for Housing and Community Amenities, and BD70.6m for Economic Affairs and Infrastructure.
Education reforms, infrastructure development including new schools and road upgrades, and improvements to sewage systems are also key components, all while the budget outlines measures to reduce the fiscal deficit, fostering financial stability alongside economic expansion and social well-being.
Zooming out, the report underlines that GCC governments anticipate a tightening fiscal outlook for 2025, with aggregate budgeted expenditure estimated at $545.3bn, down from $554.9bn last year.
Budgeted revenues are projected to decline by 3.1pc to $488.4bn from $504.1bn in 2024, primarily due to oil output cuts by Opec producers within the GCC.
The projected aggregate fiscal deficit for the GCC countries is expected to widen to $56.9bn in 2025, compared to $50.8bn in 2024.
Most GCC governments have based their revenue forecasts on a crude oil price of around $60 per barrel, though Saudi Arabia, UAE, and Bahrain did not disclose their specific oil price assumptions.
The UAE is expected to balance its budget, while other GCC nations anticipate deficits. However, the actual deficit in 2025 could be significantly lower than budgeted due to conservative oil price estimates.
Despite the tighter fiscal environment, GCC governments plan expansionary budgets, prioritising investments in healthcare, education, and infrastructure, alongside substantial funding for large-scale construction projects. A key focus remains on realigning and boosting the contribution of non-oil sectors to their economies.
Saudi Arabia is set to dominate the region's finances, accounting for approximately 65.5pc of aggregate budgeted revenues and 63.6pc of aggregate expenditure in the GCC for the year.
The regional project market remains robust, with the overall GCC project market index for upcoming contracts reaching $1.54 trillion as of April 2025, according to MEED Projects.
Saudi Arabia leads this pipeline with $801.2bn (52.1pc), followed by the UAE at $312.3bn and Oman at an estimated $169.9bn.
Crude oil prices, a major revenue driver, began the year above $80 per barrel but have since trended downwards, falling below $60/b in April 2025 following new US tariffs on China and other trading partners.
While crude oil has averaged around $71 per barrel so far this year, forecasts for the remainder of 2025 suggest a full-year average of about $69.6 per barrel. Both Opec and the IEA have reduced their 2025 oil demand growth forecasts, reflecting escalating trade tensions and a deteriorating global economic outlook.
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