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Bahrain Details Fiscal Balance Plan

General view of Bahrain World Trade Center is seen during early evening hours in Manama, Bahrain, May 2, 2020. Picture taken May 2, 2020. (Reuters)
General view of Bahrain World Trade Center is seen during early evening hours in Manama, Bahrain, May 2, 2020. Picture taken May 2, 2020. (Reuters)
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Bahrain Details Fiscal Balance Plan

General view of Bahrain World Trade Center is seen during early evening hours in Manama, Bahrain, May 2, 2020. Picture taken May 2, 2020. (Reuters)
General view of Bahrain World Trade Center is seen during early evening hours in Manama, Bahrain, May 2, 2020. Picture taken May 2, 2020. (Reuters)

Bahrain on Sunday gave details of a new economic growth and fiscal balance plan that pushes a zero-deficit target back by two years to 2024 from 2022 and increases value-added tax to 10 percent.

A government statement said the updated fiscal balance program also included reducing expenditure and project spend and streamlining distribution of cash subsidies to citizens.

The government also announced a strategic projects plan that would catalyze over $30 billion of investments and a regulatory reform package aimed at supporting $2.5 billion of foreign direct investment by 2023.

Kuwait, Saudi Arabia and the UAE, which in 2018 extended a $10 billion aid package to Bahrain, last month reiterated support for Manama’s budget plans, a move expected to help their neighbor in the debt capital markets despite delays in plans to fix its heavily indebted finances.

Last month Bahrain said that due to the coronavirus crisis last year, it had postponed the target year for a balanced budget to 2024 and announced plans to hike a value-added tax to boost state coffers.

The fiscal balance program - a set of reforms aimed at balancing the budget - was linked to the pledged $10 billion.

The ministers of finance of wealthier Saudi Arabia, Kuwait, and the UAE met with Bahrain’s finance minister on Oct. 19 to discuss Bahrain’s progress in improving its finances.

"The ministers welcomed the efforts made by the government of Bahrain in implementing the Fiscal Balance Program, and the progress made by the government despite the challenges posed by the COVID-19 pandemic," the three countries said in a joint statement.

"The Ministers affirmed their support to the Kingdom of Bahrain’s efforts in pursuing further reforms to enhance fiscal stability and strengthen sustainable economic growth."

Bahrain’s delaying of its fiscal balance program, which pushed back the zero-deficit target by two years, was seen as unlikely to deter investors from buying its debt due to expectations of continued support from richer Gulf allies, bankers and analysts have previously told Reuters.

Bahrain’s public debt climbed to 133 percent of gross domestic product last year from 102 percent in 2019, the International Monetary Fund said.

S&P forecasts Bahrain’s budget deficit, which was 16.8 percent of GDP last year, to average 5 percent between 2021 and 2024, excluding the impact of a possible hike in value-added tax.

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US Economy Grew at Solid 3% Rate Last Quarter, Government Says in Final Estimate

FILE - The New York Stock Exchange, at rear, is shown on Sept. 24, 2024, in New York. (AP Photo/Peter Morgan, File)
FILE - The New York Stock Exchange, at rear, is shown on Sept. 24, 2024, in New York. (AP Photo/Peter Morgan, File)
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US Economy Grew at Solid 3% Rate Last Quarter, Government Says in Final Estimate

FILE - The New York Stock Exchange, at rear, is shown on Sept. 24, 2024, in New York. (AP Photo/Peter Morgan, File)
FILE - The New York Stock Exchange, at rear, is shown on Sept. 24, 2024, in New York. (AP Photo/Peter Morgan, File)

The American economy expanded at a healthy 3% annual pace from April through June, boosted by strong consumer spending and business investment, the government said Thursday, leaving its previous estimate unchanged.
The Commerce Department reported that the nation's gross domestic product — the nation's total output of goods and services — picked up sharply in the second quarter from the tepid 1.6% annual rate in the first three months of the year, The Associated Press reported.
Consumer spending, the primary driver of the economy, grew last quarter at a 2.8% pace, down slightly from the 2.9% rate the government had previously estimated. Business investment was also solid: It increased at a vigorous 8.3% annual pace last quarter, led by a 9.8% rise in investment in equipment.
The final GDP estimate for the April-June quarter included figures showing that inflation continues to ease, to just above the Federal Reserve’s 2% target. The central bank’s favored inflation gauge — the personal consumption expenditures index, or PCE — rose at a 2.5% annual rate last quarter, down from 3% in the first quarter of the year. Excluding volatile food and energy prices, so-called core PCE inflation grew at a 2.8% pace, down from 3.7% from January through March.
The US economy, the world's biggest, displayed remarkable resilience in the face of the 11 interest rate hikes the Fed carried out in 2022 and 2023 to fight the worst bout of inflation in four decades. Since peaking at 9.1% in mid-2022, annual inflation as measured by the consumer price index has tumbled to 2.5%.
Despite the surge in borrowing rates, the economy kept growing and employers kept hiring. Still, the job market has shown signs of weakness in recent months. From June through August, America's employers added an average of just 116,000 jobs a month, the lowest three-month average since mid-2020, when the COVID pandemic had paralyzed the economy. The unemployment rate has ticked up from a half-century low 3.4% last year to 4.2%, still relatively low.
Last week, responding to the steady drop in inflation and growing evidence of a more sluggish job market, the Fed cut its benchmark interest rate by an unusually large half-point. The rate cut, the Fed’s first in more than four years, reflected its new focus on shoring up the job market now that inflation has largely been tamed.
Some other barometers of the economy still look healthy. Americans last month increased their spending at retailers, for example, suggesting that consumers are still able and willing to spend more despite the cumulative impact of three years of excess inflation and high borrowing rates. The nation’s industrial production rebounded. The pace of single-family-home construction rose sharply from the pace a year earlier.
And this month, consumer sentiment rose for a third straight month, according to preliminary figures from the University of Michigan. The brighter outlook was driven by “more favorable prices as perceived by consumers” for cars, appliances, furniture and other long-lasting goods.
A category within GDP that measures the economy’s underlying strength rose at a healthy 2.7% annual rate, though that was down from 2.9% in the first quarter. This category includes consumer spending and private investment but excludes volatile items like exports, inventories and government spending.
Though the Fed now believes inflation is largely defeated, many Americans remain upset with still-high prices for groceries, gas, rent and other necessities. Former President Donald Trump blames the Biden-Harris administration for sparking an inflationary surge. Vice President Kamala Harris, in turn, has charged that Trump’s promise to slap tariffs on all imports would raise prices for consumers even further.
On Thursday, the Commerce Department also issued revisions to previous GDP estimates. From 2018 through 2023, growth was mostly higher — an average annual rate of 2.3%, up from a previously reported 2.1% — largely because of upward revisions to consumer spending. The revisions showed that GDP grew 2.9% last year, up from the 2.5% previously reported.
Thursday’s report was the government’s third and final estimate of GDP growth for the April-June quarter. It will release its initial estimate of July-September GDP growth on Oct. 30.