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According to the Chief Economist of Bahrain Economic Development Board, Dr. Jarmo Kotilaine, the annual GDP growth of Bahrain will be above 3% over the next two years, and it will be led by the non-oil sector. However, the economy will continue to witness high public debt levels.

During the first six months of 2017, the year-on-year growth reached 3.4%. Kotilaine stated that during the upcoming months, it will be 3.3%. Last year, the Kingdom’s GDP grew to 3.2%, and it was almost entirely led by the non-oil sector.

As Kotilaine noted, the businesses in Bahrain are more optimistic now due to the stabilized oil prices.

Earlier this year, the International Monetary Fund (IMF), estimated that the real GDP growth in Bahrain would decrease to 2.3% in 2017 and to 1.6% in 2018. According to the IMF, the potential growth sectors are hotels and restaurants, which marked 12.9% year-over-year growth in H1 2017; the social and personal services, including education and private healthcare, were reported at 10% growth; financial services with 12.9%, and transportation and communication with 7% growth.

Kotilaine projected that beyond 2019, the real GDP growth of the Kingdom would probably decline a bit as a result of the financial reforms and the introduction of the 5% VAT in the GCC region. According to the Chief Economist, the VAT would have a positive effect on reducing the public debt. Moreover, it would create a revenue base in the non-oil sector of the economy for the first time. In addition to that, the rest of the planned taxes, including the GCC-wide excise tax on cigarettes and soft drinks, as well as the real estate taxation reforms in Bahrain, would also help. The Kingdom is yet to announce a date for the introduction of VAT and the excise tax.