Bahrain must consider policies to help restore confidence in its economy after last year’s pro-democracy uprisings hurt the small oil-exporter’s growth, the International Monetary Fund said on Tuesday after its annual review of the country.
Bahrain’s economic growth slowed to 2.2 percent in 2011, down from 4.5 percent in the previous year after social unrest forced businesses to close and investors to withdraw from the country’s mutual funds.
High oil prices and easy monetary policies helped ease the fallout from the uprisings and impact from the European debt crisis, the IMF said in its assessment.
Although the fund noted the resilience of Bahrain’s financial institutions, it said the country’s policies should be geared toward restoring confidence in its economy, including by finding a lasting resolution to the social unrest and promoting growth.
“Further measures to diversify the economy, improve the investment climate, and strengthen the labor market are essential for sustained growth and employment,” the IMF’s executive board assessment said.
The IMF also said Bahrain’s upcoming budget was an opportunity for the government to lay the foundations for fiscal reforms and said those could include value-added and corporate income taxes as well as better targeted subsidies.