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Analysis

Bahrain Economy Haunted By Bankruptcy Amid Ongoing Crackdown

Tuesday 31 December 2019
Bahrain Economy Haunted By Bankruptcy Amid Ongoing Crackdown

Alwaght- According to a recent report published by the Trading Economic website, Bahrain after Venezuela and Eritrea is the third country with a growing budget deficit. According to the report, in late 2018, Bahrain's budget deficit grew up to 11.7 percent of its GDP. The Persian Gulf Arab country's economy, hit by recession for years now, is expected to start 2020 with frustration to recover, an issue with deep roots in Al Khalifa ruling family’s policies. 

Bahrain's economic situation 

Until 2006, Bahrain had the fastest growth rate among the Persian Gulf Arab countries. One main factor behind the economic boom was the promises of reforms by King Sheikh Hamad bin Isa Al Khalifa. King Hamad, assumed the power in 1991, still had concerns about the power transition in the early years of his rule. This motivated him to make a promise for massive political and legal reforms and to bring social welfare to the small island kingdom. His promises included the release of political prisoners, return of the exiled activists, suspension of state of emergency, and foundation of a parliament. Perhaps his most important pledge was implementing the constitution that was written in 1973. He put to the referendum the National Charter of 1973. It won 98.4 percent, something made its adoption binding. 

Rise of the new king, who was yet to show his real face, crucially influenced the country’s image both at home and abroad because the country’s economy relied for boom on banking and tourism in addition to oil and gas exports. Its oil reserves are not that remarkable putting it in the lowest level among the Arab states. The country’s oil production in Bahrain Oilfield every day is only about 45,000 barrels. It also shares an oilfield with Saudi Arabia from which it produces 300,000 barrels a day. Aluminum production is the tiny kingdom’s only heavy industry. But the tourism and banking sector flourished from 2000 to 2006 thanks to a positive image the world got from the country. But the king could not anymore conceal his authoritarianism behind the artificial reforms. 

In a surprise shift, he cut the new parliament’s powers and increased the privileges and powers of the royals. He also seized the power to dismiss and install ministers, judges, military commanders, lawmakers, and also the parliament speaker. He also deprived the majority Shiite population from having share in power and administrative structure. His measures transformed the public content to frustration, triggering massive political unrest and demonstrations. 

Wrong prescriptions and gloomy outlook 

Bahrain’s king faced the protests with iron fist. He cracked down on protestors, revoked protesters nationalities, and introduced demographic changes to the population. He also sided with Saudi Arabia and the UAE against the protestors instead of trying to improve the situation. This hit hard Bahrain’s international image, brought economic recession, and scared away foreign investment from the country. The country’s GDP scored a record low in 2015. 

According to a report of the Institute of Chartered Accountants in England and Wales (ICAEW), Bahrain’s economy fell to 1.8 percent in 2018 from 3.7 percent in 2017. The same report noted that Bahrain economy’s non-oil part moved back by 2.5 percent in 2018 from 4.9 percent in 2017. It is expected to further decrease by 1.5 percent by 2019 end, the ICAEW added. 

Warnings about Bahrain’s economic crisis grow day by day. The International Monetary Fund in April 2019 predicted that Bahrain’s national debt will grow from 93 percent of the GDP in 2008 to 114 percent of the GDP in mid-term, meaning the end of 2019. 

Even though 11 years passed from the 2030 vision, many economists predict negative growth, as they cast doubt on the regime’s capability to diversify the economy and income sources. These predictions made King Isa to, once again, stretch hands for help to the same countries that siding with them brought serious challenges to his country's national economy. 

In 2018, Saudi Arabia and the UAE vowed to provide $10 billion in financial aids to Manama. But these aids are paid conditionally and in phases. The Reuters news agency reported that Manama received $2.3 billion in 2018 and is expected to receive the rest in phases until the end of 2023. The correlation of the economic recession with the Al Khalifa’s legitimacy crisis made the regime practically lose its foreign policy independence and turn into a mouthpiece of the Saudi, Emirati, and Israeli policies. 

Receiving help from Saudi Arabia and the UAE made Bahrain play a more-royalist-than-the-king role in Qatar boycott, using a bitter language against Doha even when Saudi Arabia softened its tone towards the Arab emirate, which was blockaded by Saudi Arabia, the UAE, Egypt, and Bahrain in 2017 under the excuse of supporting terrorism. When Qatar’s Emir Sheikh Tamim bin Hamad Al Thani avoided attending (Persian) Gulf Cooperation Council’s summit hosted by Riyadh on December 10, Bahrain more than the main players of the blockade blasted the absence. The country also used “non-diplomatic language” against Doha in the case of the Qatar and UAE dispute over alleged discrimination between the Arab neighbors. 

Bahrain has been among the world’s 10 most suppressive states according to Political Freedom Index. This ranking still stands for Bahrain. According to the Press Freedom Index 2018, the country is still an “extremely critical” place for the freedom of the press. The latest political freedoms reports highlight Bahrain as a country with limits to political freedoms. 

Although the crackdown against the opposition is greenlighted by the silence of the Western supporters of Al Khalifa ruler who massively quells the Shiite-led protests, the occasional reports of the international organizations from the suppression forces the Western politicians to react. This raises the risks of the investment in Bahrain. On Saturday, Italian Senator Roberto Rambo sent a long letter to the Bahraini king condemning the repression and calling for the ruler to halt the crackdown and torture and immediately release political prisoners. 

As the political crisis affects the economy, Bahrain’s economy is expected to continue its downfall. So far, the government spent 30 percent of the national budget on quelling the protests. Adel Marzouq, a Bahraini journalist and head of in-exile Bahrain Press Association, holds that the national debts and accumulated budget deficits will push Bahrain’s economy to bankruptcy in the upcoming years. 

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Bahrain Economy Deficit Crisis Crackdown

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