IMF welcomes Bahrain's "resilience" of growth, notes downside risks to outlook

WASHINGTON, July 15 (KUNA) -- The International Monetary Fund (IMF) welcomed Sunday the "resilience" of growth in Bahrain and the authorities "continued" fiscal reform efforts but noted "downside risks" to the outlook.
Following the Executive Board's consultation with Bahrain, the IMF said in a report that the Executive Directors "welcomed the resilience of growth in Bahrain, while noting downside risks to the outlook stemming from the rise in fiscal and external vulnerabilities, tighter global financing conditions, delays in fiscal adjustment, and lower energy prices." In this regard, the Directors called for "additional sustained efforts to improve Bahrain's fiscal and external positions, preserve financial sector resilience, and support diversified, inclusive growth." It added that Directors also welcomed the Bahrain authorities' "continued fiscal reform efforts, but observed that public debt is expected to increase further over the medium term and reserves are projected to remain low," and that in this regard, they agreed that "a comprehensive package of reforms is needed to reduce fiscal deficits over the medium term." The IMF noted that the Directors welcomed the authorities' commitment "to continue subsidy reforms, cut non-productive spending, and raise non-oil revenues by introducing a value-added tax by 2019," but considered that "additional steps are needed to put public finances on a sustainable trajectory, striking the right balance between revenue and expenditure measures while protecting the most vulnerable." Meanwhile, the report indicated that "the decline in oil prices since 2014 and absence of buffers have led to a rise in fiscal and external vulnerabilities," while public debt increased to 89 percent of GDP, "with large fiscal and external current deficits persisting," and "reserves remain low, covering only 1.5 months of prospective non-oil imports at end 2017." According to the IMF, output grew by 3.8 percent in 2017, and the banking system "remains stable with large capital buffers." Growth is projected to decelerate over the medium term, and that "despite planned fiscal consolidation measures, fiscal and external deficits are projected to continue over the medium term, due to the large and growing interest bill.
"Delays in implementing a credible fiscal plan and changes in market sentiment as global financing conditions tighten present downside risks to the baseline," the report warned. (end) si