Bahrain’s economy is expected to be adversely affected by COVID-19 pandemic in 2020. The real gross domestic product (GDP) of Bahrain is expected to shrink, unemployment level to increase and current account balance to decline due to COVID-19 this year. As of 20^th July 2020, Bahrain had 36,004 confirmed COVID-19 cases out of which 31,765 people have recovered from the disease while 124 have lost their lives.

In this blog post we will be focusing on economic impact of COVID-19 pandemic & fiscal and employment policy response of Bahrain government under following sections –

1. Impact of COVID-19 on Bahrain Economy in 2020

2. COVID-19 Containment Measures of Bahrain

3. COVID-19 Related Fiscal Policy Measures by Bahrain

4. COVID-19 Related Employment Policy Measures by Bahrain

1. Impact of COVID-19 on Bahrain Economy in 2020

Bahrain’s real gross domestic product (GDP) was BHD 12.90 billion in 2019 and due to COVID-19 outbreak it is estimated to decrease by 3.59% to be around BHD 12.44 billion in 2020.

Bahrain’s unemployment rate was 4.003% of total labor force in 2019. Due to slowdown in global economic activity due to COVID-19 pandemic the unemployment is expected to increase by 14.59% and reach 4.687% in 2020.

Bahrain’s current account balance has remained constantly negative since 2017. It is expected to decrease its current account balance in 2020 to 9.639% of GDP from 2.928% of GDP in 2019. This means Bahrain will remain net borrower from rest of the world in 2020.

As of 15^th Jun 2020, the Bahrain government has taken following fiscal, monetary, employment and social policy measures to contain coronavirus (COVID-19) pandemic.

2. Coronavirus (COVID-19) Containment Measures of Bahrain

Bahrain has set up a dedicated National Taskforce to tackle the spread of the virus and took measures to ensure that testing and quarantine facilities were set up without delay. The Kingdom has one of the highest testing rates per capita in the world, garnering the recognition of the World Health Organization for its agile response. Bahrain was also the first Arab country to join the Solidarity Trial to find effective treatment for the virus. The Kingdom stands ready to take further steps to ensure that the virus does not spread. Bahrain is also:

• Providing free treatment to citizens and residents.
• Providing mobile medical units to examine people in their homes.
• Allowing all working mothers to work from home.
• Suspending public and private schooling as well as higher education institutions until further notice.
• Televising educational sessions through the Ministry of Education.
• Suspending fingerprint attendance systems in government institutions.
• Granting paid medical leave for a period of 14 days to passengers arriving from affected countries.
• Assembling a volunteer task-force of over thirty thousand individuals.

On 26^th March 2020, as a part of the precautionary measures to combat the novel coronavirus (COVID-19) coronavirus, Ministry of Interior bans gatherings of more than five individuals on roads, yards, beaches, parks and other public places.

On 2^nd April 2020, Salmaniya Medical Complex (SMC) launched the home delivery service of prescribed medicines to ensure the health, safety and comfort of the patients.

On 9^th April 2020, Faeqa bint Said Al-Saleh, Health Minister, issued edict 27 of 2020, suspending the BD7 medical consultation fee, stipulated in edict 2 of 2017 on health fees for non-Bahrainis.

Travel bans/restrictions

The authorities at Bahrain International Airport may conduct medical tests on passengers arriving from any of the affected areas if the Kingdom of Bahrain is their final destination. Passengers must comply with such tests and procedures such as filling health declaration forms and screening processes.

Passengers who have been in China, Iran, Iraq or South Korea at any point within 14 days of their arrival into the Kingdom of Bahrain will be denied entry into the Kingdom with the exceptions of:

• Bahraini citizens
• Permanent residents of Bahrain
• Citizens of GCC countries
• Passengers with Prior Permission Granted (This needs to be presented prior to boarding)

The exceptions will be required to undergo medical examinations recommended by the World Health Organisation (WHO).

On-arrival visas have also been suspended until further notice.

3. Coronavirus (COVID-19) Related Fiscal Policy Measures by Bahrain

Overall fiscal measures

The government of Bahrain is supporting individuals and companies through a comprehensive USD 11.4 billion economic stimulus package.

The economic stimulus package raised by the government aims to support businesses and individuals through the following actions:

• The payment of all insured Bahraini private sector employees for three months starting April 2020 from the Unemployment Fund, following constitutional procedures and in line with the Social Insurance Law.
• The automatic payment of individuals’ and businesses’ Electricity and Water Authority utility bills for three months from April 2020 (up to the costs incurred during the same period in 2019).
• Exempting all individuals and businesses from municipal fees for three months starting April 2020.
• Exempting all businesses from government-owned industrial land rental fees for three months starting April 2020.
• Doubling the Liquidity Support Fund to US$530m.
• Exempting all tourism-related industry from tourism levies for three months starting with April 2020.
• Increasing the Central Bank of Bahrain’s loan facilities to US$9.8bn to allow debt instalments to be deferred and extra credit to be extended.
• Potential discussions on expanding the stimulus package to all working sectors (For example, Taxi & bus drivers)

Tax and contribution policy changes

The Bahrain National Bureau for Revenue (NBR) has designed and rolled out a business survey with the objective of understanding the impact of COVID-19 outbreak on Bahraini businesses and their expectations in the coming months. The NBR has allowed businesses to communicate with them in case of any struggle in accessing the business site to obtain information for submitting the VAT Return. The NBR could potentially be lenient with the deadline given that valid proof has been provided.

4. Coronavirus (COVID-19) Related Employment Policy Measures by Bahrain

On 2^nd April 2020, the Labour Market Regulatory Authority (LMRA) announced the termination of monthly work fees and fees for issuing and renewing work permits for a period of three months, starting from 1 April 2020.

Civil Service Bureau (CSB) President, Ahmed bin Zayed Al-Zayed, announced allowing ministries, entities and government departments to increase the rate of distance work to 70% as a maximum.

The redirection of all Tamkeen programmes (semi-autonomous government agency that provides loans and assistance to businesses) to support adversely affected companies, as well as the restructuring of all debts issued by Tamkeen.

Source – With inputs from Organisation for Economic Co-operation and Development (OECD), International Monetary Fund, World Bank, International Labour Organization (ILO) and Government of Bahrain