Bahrain’s 2025 economic growth to be driven by tourism, finance and manufacturing

TDT | Manama

Email: mail@newsofbahrain.com

Tourism, finance, and manufacturing are shaping Bahrain’s economic outlook for 2025, though rising global interest rates and unpredictable oil prices pose challenges for decision-makers.

The Kingdom’s efforts to move away from reliance on oil have paid off, with solid performance in non-oil sectors like tourism, financial services, and manufacturing driving recent growth.

Economic forecasts suggest Bahrain’s economy will continue expanding next year, albeit at a more measured pace, as external pressures such as inflation and oil price swings linger.

Despite having smaller oil reserves compared to its GCC neighbours, Bahrain remains tied to oil price trends due to their impact on government revenue and the energy sector.

If oil prices rise, this could improve public finances and encourage further investments.

Inflation

The Central Bank of Bahrain (CBB) has been steering monetary policy with a steady hand, aiming to keep inflation under control while supporting economic growth.

Interest rates are expected to play a key role in shaping investment flows, both from abroad and locally.

Should rates rise further, in line with the US Federal Reserve’s decisions, borrowing costs for businesses and consumers could increase, potentially dampening economic activity.

Financial hub

Nonetheless, Bahrain’s reputation as a financial hub continues to attract considerable investment, particularly as regional ties with countries like Saudi Arabia and the UAE strengthen, boosting confidence in the Bahrain Bourse.

The local market is anchored by heavyweight players such as National Bank of Bahrain, BBK, Al Baraka Group, Ahli United Bank, and Bahrain National Holding Company.

These firms, particularly in banking and real estate, are likely to drive market momentum in the coming year.

Fortunes

The Bahrain Bourse’s fortunes will hinge on interest rate movements, oil price trends, and the health of the regional economy.

While investors remain cautious given global economic uncertainties, profitable companies offering attractive dividends could lure more investment.

Bahrain’s market enjoys a reputation for stability compared to some of its regional counterparts.

Pool of investors

With the rise of digital trading platforms and technologies like blockchain, the country is well-placed to attract a broader pool of investors, potentially improving liquidity and market performance.

However, challenges remain. Inflation, higher interest rates, and currency fluctuations could pose hurdles in 2025.

The Bahraini dinar, pegged to the US dollar, is exposed to shifts in the greenback’s strength, which could complicate investment planning.

Oil prices

Furthermore, while Bahrain is less oil-dependent than some Gulf nations, fluctuations in oil prices still ripple through its economy.

Despite these pressures, Bahrain remains a magnet for investors, particularly in banking and financial services.

Government initiatives to modernise regulations and streamline business operations have made the Kingdom increasingly appealing.

New opportunities

Collaboration with Gulf neighbours on infrastructure and renewable energy projects is also expected to bring new opportunities.

Bahrain’s financial market is likely to experience ups and downs in 2025, shaped by global developments and local policies.

Yet, the Kingdom’s efforts to diversify its economy and embrace new technologies suggest a steady path forward.