Bahrain’s economy posted a resilient third quarter in 2024, expanding on multiple fronts as non-oil activity surged ahead despite mixed performances in the energy sector. The quarterly data show a clear tilt toward diversification, with non-oil sectors driving most of the growth while the oil segment faced headwinds from maintenance activities and softer prices. The period also highlighted developments in investment, finance, tourism, and digital transformation, underscoring Bahrain’s ongoing strategy to broaden GDP sources, attract capital, and strengthen macro stability.
Macroeconomic overview for Q3 2024
Bahrain’s real GDP grew by 2.1 percent year on year in the third quarter of 2024, according to figures released by the Ministry of Finance and National Economy. This expansion was propelled by robust performance in the non-oil sector, which rose by 3.9 percent during the same period. Non-oil activities accounted for a substantial 86.4 percent of the kingdom’s real GDP, underscoring the sector’s central role in the economy’s expansion. The data reveal a clear shift away from oil dependence, with the non-oil base strengthening as diversification efforts continue to bear fruit.
The information and communication sector stood out as a major engine of growth, posting an 11.9 percent year-on-year increase. This surge was supported by heightened mobile and broadband subscriptions, signaling continued expansion in digital infrastructure and services that feed into broader economic activities. The gains in ICT aligned with Bahrain’s broader digitalization push and the aim to position the country as a regional hub for technology-enabled services. In the broader regional context, Bahrain’s growth trajectory in the third quarter mirrored favorable trends observed across the Gulf Cooperation Council, where Saudi Arabia expanded by 2.8 percent and Qatar by 2 percent, driven by ongoing diversification and investment.
Despite the robust performance in non-oil sectors, Bahrain’s economy faced challenges in the oil sector. Oil activities contracted by 8.1 percent year on year, contributing to a 0.9 percent decline in nominal GDP. The oil sector headwinds were linked to maintenance at key fields and a backdrop of softer global oil prices, which weighed on production and revenue streams. Yet the resilience of the non-oil economy helped cushion the overall growth rate, illustrating the effectiveness of diversification strategies in buffering against oil-market volatility. The sectoral split reinforces the theme that Bahrain’s growth in 2024 has been increasingly driven by services, manufacturing, and digital-enabled activities rather than energy alone.
In terms of sectoral composition, manufacturing expanded by 4.2 percent, partially aided by higher output at the Bapco Refinery, whose modernization has supported production capacity. Wholesale and retail trade grew by 2.1 percent, aided by a significant rise in e-commerce transactions that broaden consumer reach and efficiency in distribution networks. The financial and insurance activities also performed strongly, expanding by 5.8 percent and contributing meaningfully to overall growth, reflecting healthy domestic demand and prudent financial intermediation. An important driver of the non-oil expansion was the growth in electronic funds transfers, which rose by 13.7 percent year on year, illustrating a deepening of digital payment systems and financial inclusion across the economy.
Trade and investment indicators presented a mixed set of signals. The current account surplus narrowed by 54.5 percent year on year to 148.6 million Bahraini dinars, partly reflecting a 19.2 percent decline in the value of oil exports. At the same time, non-oil exports registered modest growth of 1.1 percent, with base metals and mineral products leading the category. Foreign direct investment stock climbed by 3.5 percent year on year to reach 16.5 billion dinars, indicating continued investor confidence in Bahrain’s growth potential. The financial and insurance sector remained the dominant contributor to foreign direct investment, accounting for 67.3 percent of total FDI stock, underscoring the sector’s role as a magnet for capital and strategic resources.
Development projects across multiple sectors advanced during the quarter, reinforcing Bahrain’s commitment to upgrading infrastructure, industry, and services. The Bapco Modernization Program, which was completed in December, increased refinery capacity by 42 percent, representing the largest capital investment in Bapco’s history and a tangible step toward improved energy efficiency and output. In the tourism sector, four new five-star hotels and the Hawar Resort by Mantis were inaugurated, expanding Bahrain’s hospitality offerings and potentially lifting visitor arrivals and tourism-related spending. The healthcare sector saw the construction of a new rehabilitation center in Al Jasra, while the Aluminum Downstream Industries Zone was launched as part of Bahrain’s Industrial Strategy, signaling momentum in downstream manufacturing and value-add sectors.
Monetary and financial indicators mirrored positive momentum. The broad money supply expanded by 6.1 percent year on year, supported by a 15.6 percent rise in government deposits, signaling prudent fiscal management and ample liquidity in the system. Total loans provided by retail banks grew by 4.9 percent year on year, with personal loans comprising roughly half of the total, highlighting ongoing household demand and credit availability for consumption and investment. The labor market posted a modest gain, with the number of Bahrainis employed in the public and private sectors rising by 1.7 percent to 153,842, pointing to continued job creation and public-sector resilience amid broader economic shifts.
The Financial sector and capital markets also reflected a positive posture. Recruitment under the Economic Recovery Plan reached 98 percent of its annual target for 2024, and more than 13,679 Bahrainis benefited from training initiatives, underscoring a focus on human capital development as a cornerstone of long-term growth. Bahrain’s capital markets performed well, with the Bahrain All Share Index closing the third quarter at 2,012.77 points, up 3.8 percent year on year. The Bahrain Islamic Index outpaced general equities, rising by 10.1 percent, illustrating strong demand for sharia-compliant assets. Market capitalization increased by 2.4 percent to 7.8 billion dinars, signaling investor confidence in Bahrain’s growth trajectory and reform agenda. In global competitiveness rankings, Bahrain retained its position as the freest economy in the Arab world, ranking 34th globally in the Economic Freedom of the World report, while climbing eight places to 30th in the IMD World Digital Competitiveness Ranking, reflecting progress in digital adoption and a more conducive business environment.
In sum, the third quarter highlighted Bahrain’s ongoing transition toward a more diversified economy, with non-oil activity providing a robust growth platform even as oil-related headwinds weighed on nominal output. The data underscore the importance of a resilient external sector, continued investment in infrastructure, and an expanding digital economy as pillars supporting macro stability and long-term prosperity.
Non-oil sector performance and drivers
The non-oil economy emerged as the primary engine of growth in Bahrain’s Q3 2024 performance, signaling a sustained shift away from sole reliance on energy markets and toward a broad-based service and industry mix. The non-oil sector expanded by 3.9 percent year on year, underscoring the resilience and adaptability of the economy in a period marked by external volatility and commodity-price fluctuations. This expansion was not incidental; it reflected targeted investments, policy support, and structural reforms aimed at modernizing key industries and expanding productive capacity across multiple domains.
A standout contributor within the non-oil domain was the information and communication sector. With an 11.9 percent year-on-year rise, ICT served as a cornerstone for productivity gains and new business models. The surge was anchored by increased mobile and broadband subscriptions, which not only expanded digital access but also catalyzed ancillary activities such as fintech, e-commerce, and cloud-based services. The strong ICT performance also supported other sectors by enabling more efficient supply chains, data-driven decision-making, and consumer engagement channels that amplify demand for goods and services across the economy.
The financial and insurance activities sector also demonstrated notable strength, growing by 5.8 percent. This growth reflected robust domestic demand, prudent risk management, and an expanding financial ecosystem that supports business investment and consumer lending. The momentum in these segments contributed to the overall resilience of Bahrain’s non-oil output, reinforcing confidence among lenders, investors, and households about the availability and effectiveness of financial services. A further driver within the non-oil landscape was the surge in electronic funds transfers, which increased by 13.7 percent year on year. This uptick points to deeper penetration of digital payment channels, greater financial inclusion, and more efficient monetary transmission mechanisms, all of which feed into higher consumer spending and smoother business transactions.
Manufacturing added to the positive non-oil story by recording a 4.2 percent expansion. This growth was aided by higher production levels at the Bapco Refinery, whose modernization has bolstered capacity and efficiency. The expansion in manufacturing translates into higher industrial output, potential employment gains, and more diversified export options, aligning with Bahrain’s goal of broadening its industrial base beyond crude energy. Wholesale and retail trade rose by 2.1 percent, supported by a marked increase in e-commerce activity and a broader shift toward digital-to-physical commerce channels. The interplay between traditional retail and online platforms helped sustain consumer spending and investment flows, reinforcing the non-oil growth narrative.
Beyond the immediate sectoral performance, several structural trends supported the non-oil expansion. The rise in non-oil exports by 1.1 percent, led by base metals and mineral products, indicated a modest but meaningful improvement in the country’s external competitiveness and production capabilities. The persistence of a digital economy, as evidenced by ICT growth, also suggests ongoing productivity enhancements, which can translate into higher value-added production and better business outcomes across industries. The financial sector’s continued strength and the expansion of electronic transfers together signal a modernizing economy where households and firms increasingly rely on formal financial channels for transactions, savings, and investment.
In terms of labor dynamics, the non-oil sector’s expansion correlated with modest improvements in employment opportunities within the private and public spheres, though the data show a measured pace of job creation relative to the overall growth rate. The expansion in manufacturing, logistics, and services is likely to have a positive spillover effect on wages and living standards over time, particularly as investment in infrastructure and digital capabilities continues. The tourism-related developments, including new high-end hotels, are also expected to support employment and service-sector activity through visitor demand, creating opportunities in hospitality, food services, and ancillary industries.
Looking ahead, the non-oil sector’s trajectory will be shaped by ongoing policy support, investment in digital infrastructure, and continued diversification into high-value activities. The integration of the financial, logistics, and technology sectors could generate cross-cutting gains that amplify productivity and competitiveness. As global demand evolves, Bahrain’s ability to sustain non-oil growth will depend on maintaining a favorable investment climate, ensuring access to credit, and continuing to upgrade human capital to meet the needs of modern industries. The data from Q3 2024 indicate a positive momentum, but they also call for vigilance to maintain momentum into 2025 and beyond, particularly regarding external demand and price dynamics in energy markets.
Oil sector headwinds and energy dynamics
The oil sector in Bahrain faced a set of headwinds during the third quarter of 2024, tempering overall growth despite the strength seen in non-oil activities. Real oil-related activities declined year on year by 8.1 percent, underscoring the sensitivity of the energy segment to both maintenance activities and global price signals. These contractions contributed to a negative pull on nominal GDP growth, which registered a 0.9 percent drop. The divergence between the performance of oil and non-oil sectors illustrates the enduring need for diversification and resilience in the face of energy-market volatility.
One of the key drivers of the oil sector’s slowdown was maintenance at the Abu Sa’afa field. Routine or planned maintenance reduces output temporarily, but it also underscores the importance of sustaining long-term productivity and capacity. In parallel with maintenance activities, there was a notable decline in global oil prices during the period under review, which weighed on production economics and revenue generation from oil-related activities. The combination of these factors—maintenance downtime and softer prices—help explain the YoY contraction observed in real oil activity and its drag on the broader economy.
The data point to a significant drop in oil production at the Abu Sa’afa field as well, with average daily oil production down by 11.5 percent year on year. This decline underscores the susceptibility of oil output to field-specific events and the external price environment. While the oil sector’s short-term drag is evident, it also reinforces the rationale for aggressive diversification and investment in non-oil industries that can offset fluctuations in energy markets. In a broader sense, Bahrain’s energy strategy can benefit from continued modernization and efficiency gains in refining and downstream operations, which could partially cushion the economy against upstream price volatility and maintenance-related downtime.
On the policy front, the oil sector dynamics underscore the value of maintaining fiscal and monetary levers that support overall macro stability even when energy revenue is uncertain. The growth momentum in the non-oil realm—driven by ICT, financial services, manufacturing, and e-commerce—provides a durable contrary force against oil-price swings. The ongoing development of downstream capabilities, such as the Bapco modernization program, not only enhances refinery capacity but also reinforces energy security and export potential. This configuration aligns with a broader strategy of reducing reliance on crude export income by promoting value-added production and diversified trade flows.
In the external context, oil-market volatility remains a critical risk factor for Bahrain, given the country’s exposure to oil revenue cycles. The economy’s resilience rests on the breadth and depth of non-oil activity that can sustain growth and employment even when crude output and prices wobble. Policymakers may consider continuing to strengthen non-oil sectors through targeted incentives, investment in digital infrastructure, and reforms that ease business operations and attract foreign capital. The oil sector’s performance in Q3 2024 thus serves as a reminder of the importance of diversification, modernization, and efficiency improvements that collectively support long-term economic well-being despite episodic energy-market challenges.
External sector: trade, current account, and investment dynamics
The external sector showed a mixed but ultimately stabilizing picture in the third quarter of 2024, reflecting shifts in export composition, foreign investment, and external demand conditions. The current account surplus contracted notably, narrowing by 54.5 percent year on year to 148.6 million Bahraini dinars. The decline was largely attributable to a substantial drop in oil-export values, which fell by 19.2 percent, underscoring the sensitivity of external earnings to crude price and volume fluctuations. Against this backdrop, non-oil exports managed to eke out a modest gain of 1.1 percent, signaling some diversification of export baskets toward non-oil commodities, with base metals and mineral products leading the improvement.
On the investment front, foreign direct investment stock increased by 3.5 percent year on year, reaching 16.5 billion dinars. This growth indicates sustained investor confidence in Bahrain’s macro stability and reform trajectory, even amid uneven performance across sectors. Within the FDI mix, the financial and insurance sector remained the dominant magnet for foreign capital, accounting for 67.3 percent of total FDI. This concentration underscores the sector’s pivotal role in shaping Bahrain’s external capital flows and its potential to empower other sectors through enhanced financial intermediation, project finance, and risk management capabilities.
Trade dynamics during the quarter reflected the interplay between oil exposure and non-oil diversification. Oil export values’ 19.2 percent year-on-year retreat weighed on the current account, while non-oil exports showed only a modest positive shift. The modest growth in non-oil exports suggests room for further expansion through enhanced value addition, improved logistics, and targeted support for high-potential sectors such as base metals and mineral products. The external sector’s overall performance highlights the importance of strengthening non-oil trade ties, expanding export capabilities, and maintaining a favorable investment climate to sustain long-run external stability.
Looking ahead, Bahrain’s external outlook will hinge on continued diversification strategies and the ability to attract higher-value foreign investment. The ongoing modernization in energy and downstream industries can support export earnings and potential spillovers into non-oil sectors, including manufacturing and services. A robust external sector will also be critical for maintaining currency stability, financing requirements, and macro resilience in an environment where oil market dynamics can be volatile. The Q3 data thus reinforce the need for ongoing policy emphasis on improving competitiveness, reducing trade frictions, and expanding the capacity to process and export non-oil products.
Development projects and sectoral investments
Development projects in Bahrain during the third quarter spanned energy, tourism, healthcare, and industrial zones, reflecting a broad-based approach to upgrading the country’s productive landscape. A centerpiece of these efforts was the Bapco Modernization Program, which reached completion in December and delivered a substantial 42 percent increase in refinery capacity. This upgrade constitutes the largest capital investment in Bapco’s history and signals a meaningful step toward enhanced energy efficiency, increased processing capacity, and potential improvements in export competitiveness. The project’s successful completion underscores Bahrain’s commitment to modernizing core energy infrastructure as a platform for broader economic growth and resilience.
In the tourism domain, the quarter witnessed the inauguration of four new five-star hotels and the Hawar Resort by Mantis, expanding the kingdom’s hospitality offerings and strengthening its appeal as a destination for business and leisure travelers alike. The arrival of these premium properties is expected to stimulate ancillary sectors such as food and beverage, entertainment, and cultural experiences, while potentially boosting domestic employment and tourism-related investments. Tourism diversification aligns with broader economic goals of broadening net inflows from services and creating a more resilient growth engine less dependent on energy markets and commodity cycles.
Healthcare infrastructure received a notable upgrade with the construction of a new rehabilitation center in Al Jasra, reflecting public health strategy and a commitment to expanding capacity in specialized care services. Meanwhile, the Aluminum Downstream Industries Zone was launched under Bahrain’s Industrial Strategy, signaling a strategic push to develop downstream manufacturing linked to the aluminum value chain. The Zone promises to attract investment, create jobs, and foster the development of higher-value-added activities within the metal sector, contributing to a more diversified industrial landscape. Taken together, these development initiatives illustrate Bahrain’s multi-pronged approach to fostering growth through energy efficiency, tourism expansion, healthcare resilience, and advanced manufacturing.
From a financing and implementation perspective, these projects contribute to domestic demand, boost private sector confidence, and enhance the country’s supply-side capabilities. They also reflect a coordinated policy framework that aligns capital formation with strategic sectors identified for growth. The ongoing progress in these areas suggests that the economy is building a more complex and interconnected set of growth drivers, reducing reliance on any single sector and creating a broader base for job creation, productivity gains, and technology adoption. The outcomes of these investments will become clearer in the coming quarters as project commissioning, capacity utilization, and ancillary spending feed through to GDP and balance of payments metrics.
Monetary and financial indicators
The monetary and financial landscape in Qatar (Q3 2024) exhibited positive momentum as the broad money supply expanded 6.1 percent year on year, supported by a notable 15.6 percent increase in government deposits. This pattern signals a liquidity-rich environment that can sustain lending growth, financial intermediation, and public sector spending aligned with development goals. The liquidity expansion provides space for banks to support private sector activity, including consumer credit, investment financing, and business expansion across non-oil sectors. It also aligns with a policy stance that seeks to balance growth with prudent macro risk management, ensuring that credit expansion remains sustainable and aligned with inflation dynamics and financial stability.
Retail bank lending responded with a 4.9 percent year-on-year increase in total loans, with personal loans comprising nearly half of the total. This composition indicates a continued emphasis on consumer credit as a driver of domestic demand, supporting household consumption, durable goods purchases, and real estate activity. The rise in personal lending can also reflect stronger consumer confidence and a demand-driven impulse to invest in education, housing improvements, and other life-enhancing expenditures. At the same time, the labor market showed resilience, with 1.7 percent more Bahrainis employed in both public and private sectors, reaching 153,842. This employment growth underscores the macro policy success in sustaining labor market vitality even amid sectoral shifts and global economic uncertainties.
The labor market’s performance is complemented by policy-driven employment initiatives. Recruitment under the Economic Recovery Plan reached 98 percent of its annual target for 2024, while more than 13,679 Bahrainis participated in training programs. These figures reflect a sustained commitment to human capital development, targeting both immediate employment gains and longer-term productivity improvements. The training initiatives are designed to equip the workforce with skills aligned to growth sectors such as ICT, manufacturing, logistics, and services, thereby reinforcing Bahrain’s competitiveness and reducing structural unemployment risks.
Capital markets demonstrated continued strength, with the Bahrain All Share Index closing the third quarter at 2,012.77 points, up 3.8 percent year on year. The Bahrain Islamic Index delivered even stronger performance, rising 10.1 percent, signaling healthy demand for sharia-compliant assets in a market environment that values ethical and transparent financial instruments. Market capitalization increased to 7.8 billion dinars, a 2.4 percent rise, reflecting investor confidence in Bahrain’s reform path and growth potential across non-oil sectors. These market dynamics, alongside rising liquidity and improved confidence in policy direction, reinforce Bahrain’s status as a regional hub for finance and investment.
From a competitiveness perspective, Bahrain retained its standing as the freest economy in the Arab world and climbed eight places to rank 30th in the IMD World Digital Competitiveness Ranking, signaling meaningful progress in adopting digital technologies and maintaining an agile business environment. The combination of monetary ease, investment in human capital, and tech-driven productivity gains supports a virtuous cycle of investment, job creation, and competitiveness enhancements. Collectively, these monetary and financial indicators paint a picture of macro stability and financial resilience that underpin ongoing growth in non-oil sectors while oil activity remains a source of volatility that diversification helps to offset.
Capital markets and competitiveness
Bahrain’s capital markets maintained a robust performance through the third quarter, underscoring the region’s growing appetite for equity exposure and risk-adjusted returns within a stable macro framework. The All Shares Index closed at a level that reflected steady year-on-year gains, accompanied by a sharp rise in the Islamic index, which outpaced broader equities due to strong demand for compliant assets in a global environment characterized by improving risk sentiment. The expansion in market capitalization further signaled investor willingness to fund ongoing development projects and growth initiatives across sectors beyond oil, including manufacturing, technology-enabled services, and tourism-related services.
In the broader competitive landscape, Bahrain’s ranking in global competitiveness metrics remained favorable and continued to improve in digital-oriented metrics. The country retained its position as the freest economy within the Arab world, a testament to the underlying regulatory framework, business-friendly policies, and consistent institutional support for private enterprise. The IMD World Digital Competitiveness Ranking’s improvement to 30th place highlighted gains in digital adoption, innovation ecosystems, and the ability to leverage digital tools to enhance productivity and economic inclusion. These gains are consistent with the growth momentum seen in ICT and e-commerce activities, which depend on a transparent, efficient, and adaptable regulatory environment.
The stock market’s positive trajectory and gains in the Islamic index also reflect confidence in Bahrain’s reform agenda, including diversification efforts across non-oil sectors. Investors appear to be pricing in the potential for continued growth in services, technology, and industrial zones, supported by targeted public investments and favorable macro conditions. The market’s performance also suggests that investors expect ongoing improvements in governance, transparency, and the ease of doing business, which further enhances Bahrain’s attractiveness as a regional financial hub. The combination of a strengthened capital market, rising liquidity, and positive policy signals contributes to a favorable investment climate that can attract both regional and international capital.
Looking ahead, Bahrain’s capital markets are likely to respond to continued improvements in non-oil growth, particularly in ICT, financial services, and manufacturing, which are supported by ongoing development projects and digital infrastructure initiatives. The success of downstream industrial zones and the expansion of the aluminum sector could provide new revenue streams and diversification benefits that bolster equity valuations and credit quality across the market. In this environment, investors will be attentive to macroeconomic signals, policy continuity, and the pace at which the Economic Recovery Plan translates training and employment initiatives into sustained productivity gains. The capital markets, in tandem with policy measures, could thus play a critical role in financing Bahrain’s diversification agenda and reinforcing financial-system resilience.
Regional context and global outlook for Bahrain
Bahrain operates within a regional framework where GCC economies share common objectives around diversification, sustainability, and resilience to energy-price shocks. The third-quarter performance aligns with a broader GCC pattern of strengthening non-oil sectors as governments seek to reduce dependence on hydrocarbons and to create more diversified growth models. The positive dynamics in Saudi Arabia, with a 2.8 percent GDP growth, and Qatar, with a 2 percent rise, reflect a regional impetus toward investment, privatization, and service-sector expansion that complements oil-and-gas revenue streams with services, manufacturing, and technology-enabled industries. Bahrain’s growth story mirrors this trend while also highlighting the unique emphasis on digital transformation and downstream manufacturing that characterizes its development program.
The oil sector’s weaker performance underscores a shared risk across the region: energy-market volatility and maintenance cycles can introduce near-term headwinds even as structural reforms advance. For Bahrain, the emphasis on downstream refinery modernization, logistics improvements, and the aluminum downstream zone signals a deliberate effort to create value-added activities less exposed to volatile crude prices. This approach is consistent with broader regional objectives to strengthen energy efficiency, expand industrial capacity, and grow non-oil export capabilities, thereby enhancing resilience to external shocks and global demand cycles.
In a global context, Bahrain’s performance must be viewed alongside ongoing digitalization and fintech adoption that are reshaping financial centers worldwide. The gains in the Information and Communications sector, the rise of electronic funds transfers, and the strong performance of the investment-grade financial sector position Bahrain as a stable platform for regional commerce and cross-border trade. The improvements in digital competitiveness metrics reflect a global trend toward technology-enabled governance, business processes, and innovation ecosystems, which Bahrain has embraced as part of its Industrial Strategy and Economic Recovery Plan. The combination of regulatory clarity, fiscal prudence, and strategic infrastructure investments strengthens Bahrain’s position in a competitive global market for investment, trade, and knowledge-based industries.
From a policy perspective, Bahrain’s development trajectory suggests a continued emphasis on non-oil growth, private-sector development, and human capital expansion. The government’s focus on training programs, job creation through the Economic Recovery Plan, and targeted sectoral investments in ICT, manufacturing, and downstream industries will be essential for sustaining long-run growth and improving living standards. As global demand evolves and energy markets shift, Bahrain’s capacity to attract high-value investment, maintain a favorable business environment, and accelerate digital adoption will remain central to its economic strategy. Regional comparisons indicate that Bahrain’s approach—anchored in diversification, modernization, and financial-market development—resonates with GCC-wide ambitions while preserving its own distinctive strengths in technology and services.
Policy implications and outlook
Looking ahead, Bahrain’s policy landscape will play a decisive role in translating Q3 2024 momentum into sustained, high-quality growth. The strong performance of non-oil sectors suggests that growth could remain robust if the policy framework continues to support investment, digitalization, and value-added manufacturing. Policymakers may prioritize maintaining a favorable environment for private investment, ensuring access to credit for small and medium-sized enterprises, and continuing to streamline regulations that hinder startup and scaling opportunities in high-potential sectors such as ICT, logistics, and downstream manufacturing.
Diversification remains at the core of Bahrain’s strategy, with the continued expansion of non-oil activities serving as a cushion against oil-price volatility. The energy sector’s modernization, evidenced by the Bapco upgrade, should help stabilize energy supply and enable greater export potential, while downstream value chains such as aluminum and other manufacturing segments offer higher value-added opportunities. To sustain external resilience, Bahrain could aim to broaden its export base further, reduce transaction costs for international trade, and enhance the quality and depth of financial services to attract more foreign capital into non-oil projects.
Policy continuity in fiscal management, inflation targeting, and financial stability will be essential as external conditions evolve. The rise in broad money and credit growth indicates an accommodative stance that should be carefully calibrated against inflation risks and the need to preserve financial stability. The ongoing training and employment initiatives are a critical component of the long-term growth story, ensuring that the labor force can meet the needs of a digital and service-oriented economy. Sustained progress in digital competitiveness, supported by regulatory reforms and investment in infrastructure, will be a key determinant of Bahrain’s ability to attract high-quality investments and to compete effectively on the regional and global stage.
Another consideration is the balance between public investment and private-sector dynamism. The government’s role in funding large-scale energy and industrial projects can be complemented by private finance and public-private partnerships, maximizing efficient capital allocation and ensuring social and fiscal sustainability. As the economy becomes more digital and service-oriented, policy tools that promote digital literacy, cybersecurity, data governance, and fintech innovation will be increasingly important for maintaining competitiveness and attracting global talent. Overall, the Q3 2024 data provide a robust foundation for a cautiously optimistic outlook, contingent on continued policy support, prudent macro management, and sustained momentum in non-oil sectors.
Conclusion
Bahrain’s third-quarter 2024 performance reveals a nuanced but resilient economy marked by a clear shift toward non-oil growth, digital transformation, and value-added industrial activity. The non-oil sectors expanded by 3.9 percent, led by the information and communication sector’s 11.9 percent surge and reinforced by gains in financial services, manufacturing, and e-commerce. Oil activities contracted by 8.1 percent, reflecting maintenance cycles and softer global prices, which weighed on nominal GDP and highlighted the importance of diversification for macro resilience. The external sector showed mixed signals, with a substantial current account surplus narrowing due to lower oil exports but supported by continued growth in non-oil exports and a steady rise in foreign direct investment, particularly in the financial and insurance sphere.
Development initiatives across energy, tourism, healthcare, and industrial zones underscored Bahrain’s multi-pronged approach to strengthening productivity, employment, and global competitiveness. The Bapco modernization program’s 42 percent capacity increase marks a milestone in energy infrastructure, while new premium hotels and the Hawar Resort by Mantis expanded the country’s tourism appeal. The Aluminum Downstream Industries Zone and new healthcare facilities added to the pipeline of growth drivers aimed at high-value manufacturing and services. Monetary and financial indicators painted a positive backdrop for continued lending, liquidity, and employment, with a notable rise in government deposits and steady job creation supported by targeted training and recruitment under the Economic Recovery Plan.
Capital markets and competitiveness metrics reinforced investor confidence and Bahrain’s standing as a regional financial hub. The All Share Index and Islamic Index posted gains, while market capitalization rose, reflecting expectations of ongoing reform and growth in non-oil sectors. Bahrain’s global competitiveness outlook remained favorable, maintaining its status as the freest economy in the Arab world and achieving a notable rise in digital competitiveness. In the regional context, Bahrain’s performance aligns with GCC diversification trends while underscoring its distinctive emphasis on digitalization, downstream industrial development, and service-oriented growth. Looking forward, Bahrain’s continued policy support, strategic investments, and emphasis on human capital will be crucial for translating the quarterly gains into sustained, inclusive, and high-quality growth.
