The strategic location of the island country of Bahrain, combined with its business-friendly ecosystem and diversified economy, have seen it emerge in recent decades as an attractive destination for foreign investment. The kingdom’s economic resilience during the disruption that came with the Covid-19 pandemic, aided by stable governance and a commitment to economic reform, have positioned the country as a competitive player in the GCC and broader Middle East.


One of the first groups to settle in the area was the Bronze Age Dilmun civilisation, approximately 5000 years ago. Throughout history Bahrain’s strategic location has attracted the attention of numerous empires, including the Persians, Sumerians, Assyrians, Babylonians, Arabs, Portuguese and British. Having served as a commercial centre in ancient times, Bahrain’s advantageous location for trans-Gulf trade continues to draw merchants and multinationals to this day.


In 1932 Bahrain pioneered oil production in the Middle East, and in doing so established the region’s initial framework for the petroleum industry. The new resource enabled Bahrain to modernise its economy by moving beyond traditional industries such as pearl diving and fishing. Hydrocarbons production also provided the funding to help the country diversify to its economy and establish itself as a leading regional financial centre in the 1970s and 1980s.

Bahrain’s regulatory system has been a driving force that attracted banks seeking stability in the region and many have established operations in the kingdom. Bahrain is adapting to the changing banking landscape in the GCC by focusing on financial technology (fintech). Highlighting the segment’s potential, as of mid-2022 Bahrain was host to more than 120 fintech firms, some of which are valued at more than $1bn.

The country’s guiding plan, Bahrain Economic Vision 2030, aims to enhance private sector growth and promote government investment in infrastructure, affordable housing, human resource development and digital transformation. The kingdom maintains a developed industrial sector and hosts the world’s largest single-site aluminium smelter outside of China, Aluminium Bahrain, with downstream firms creating products for export. Other industries include downstream hydrocarbons processing and ICT, with segments such as data analytics, cloud computing, storage and business process outsourcing expanding rapidly.

GDP contracted by 4.9% in 2020 amid the pandemic, as the health and economic crisis impacted sectors such as energy and tourism. Recovery followed, with GDP growth at 2.7% and 4.9% in 2021 and 2022, respectively, and Ministry of Finance and National Economy projections for 2023 at 2.9%. However, the budget deficit is expected to amount to 4.1% of GDP in 2023 and 5.6% in 2024. Challenges also remain in tackling public debt, which reached 125% of GDP in 2023 and is projected to be 128% in 2024, according to the IMF. In October 2021 the government announced an update to the Fiscal Balance Programme, which included a value-added tax increase from 5% to 10%. This sets the country on course to balance the budget in the years ahead.

Model of Development

In the World Economic Forum’s 2019 Global Competitiveness Index, Bahrain’s overall ranking rose five places to 45th out of 141 economies. More specifically, it placed 18th for product market, 31st for infrastructure, 33rd for the labour market and 37th for the financial system. However, Bahrain ranked 117th for macroeconomic stability.

The country’s model of development has been studied and formalised by the UN Industrial Development Organisation (UNIDO), in partnership with the Arab International Centre for Entrepreneurship and Investment, based in Manama. The UNIDO Enterprise Development and Investment Promotion programme, created in Bahrain, has been implemented in more than 50 countries around the world.

In 2000 the government formed the Bahrain Economic Development Board (Bahrain EDB), chaired by the crown prince, Sheikh Salman bin Hamad bin Isa Al Khalifa. The organisation was created to enhance the competitiveness of the economy by improving the ease of doing business and fostering a more attractive environment for foreign investors. In a bid to facilitate increased privatisation and improve efficiency, the Tender Board – a fully independent body – works to improve government transparency and the clarity of the public tender system by creating pre-certification, online tracking and standardisation of tenders.

Addressing the challenges posed by an expanding young population and seeking to build a more resilient job market after the pandemic, in January 2021 the crown prince launched the National Employment Programme 2.0, which created 26,344 jobs that year. With foreign investment and innovation viewed as crucial elements in expanding economic opportunity, Bahrain is working to develop relations with a diverse range of countries. For example, in late 2020 Bahrain signed agreements with Israel on technical cooperation, technology transfer and small business development, and in 2021 it announced a partnership with the US for the creation of the US Trade Zone. Construction on the zone began in February 2022, with full operations expected to commence in 2025. February 2022 also saw the country introduce the Golden Residency Visa to attract international talent and investment.

Government Structure

Bahrain gained full sovereignty from Great Britain in 1971 and has been governed as a constitutional monarchy since 2002 under the leadership of King Hamad bin Isa Al Khalifa. He came to power in 1999 upon the passing of his father, Sheikh Isa bin Salman Al Khalifa, who began his rule in 1961. Prince Khalifa bin Salman Al Khalifa held the position of prime minister for the 50 years preceding his death in 2020. Prince Salman is the kingdom’s prime minister, as well as the deputy supreme commander of the Bahrain Defence Force and chairman of the Bahrain EDB. Executive authority in the kingdom is entrusted to the king and the Council of Ministers.

A bicameral legislature, known as the National Assembly, was re-established in 2002 after its suspension in 1975. The National Assembly consists of a 40-seat lower house, the Council of Representatives, whose members are elected to four-year terms; and the Consultative or Shura Council, a 40-seat upper house, whose members are appointed by the king. The Shura Council has veto power over the lower house. Parliamentary elections took place in November 2022 and garnered 73% voter turnout. Women increased their presence in the Parliament that year to hold eight of the 40 seats.

Financial Services

Bahrain’s rise to prominence as a key regional financial centre occurred in the 1970s. The banking sector benefitted significantly from the kingdom’s economic diversification programme and is highly regarded for its regulatory framework under the Central Bank of Bahrain. In recent years regulations have been updated at a quick pace in an ongoing effort to keep up with the impact of new technologies on the sector. According to the central bank, there were 364 financial institutions in the country as of December 2022, and the sector accounted for 17.7% of GDP in 2021. Notably, approximately 70% of employees in the sector were Bahraini nationals as of end-2022.

Islamic Finance

Bahrain ranked fourth after Malaysia, Saudi Arabia and Indonesia for the most developed Islamic finance market in the world, and third in terms of governance on the “Islamic Finance Development Indicator Report 2022” – published by the Islamic Corporation for the Development of the private sector and REFINITIV. The kingdom hosts a number of regulatory institutions that provide international standards for the segment, such as the Accounting and Auditing Organisation for Islamic Financial Institutions, the International Islamic Financial Market, the Islamic International Rating Agency, and the General Council for Islamic Banks and Institutions. Bahrain regularly issues sukuk (Islamic bonds), which are well received by the international financial community, and is home to several takaful (Islamic insurance) companies.


The energy sector is a pillar of the economy, accounting for the majority of government revenue but a shrinking share of GDP. Onshore oil production has been relatively steady over the last decade, at 48,000 barrels per day (bpd) in 2013 and 42,000 bpd in 2019, according to data from the Ministry of Oil and Environment. The majority of crude comes from the offshore Abu Safa Field – whose output is shared with Saudi Arabia – which reached its full capacity of 300,000 bpd in 2004. The country refined approximately 260,000 bpd per year in 2010-19, with this figure dropping to 228,000 bpd in 2021, according to BP’s “Statistical Review of World Energy 2022” report. The Bahrain Petroleum Company (Bapco) operates a refinery with a throughput of 267,000 bpd, and in 2019 launched the Bapco Modernisation Programme (BMP), a multibillion-dollar project to boost refining capacity to 380,000 bpd. The BMP is expected to be completed in 2024.

In terms of finds, a significant offshore shale oil discovery of some 80bn barrels was announced in April 2018 with subsequent years seeing extensive assessments for viability. Production could be accelerated if partners are found to commercialise the reserves (see Energy & Utilities chapter). Natural gas output, meanwhile, increased from 12.6bn cu metres in 2011 to 17.2bn cu metres in 2021, according to figures from BP. While there are high-potential projects in the pipeline, Bahrain is committed to exploring other energy sources. In May 2023, nogaholding, which provided overarching support for the oil and gas entities operating in the kingdom, was rebranded to Bapco Energies to emphasise its commitment to sustainable energy solutions and diversification.


Bahrain’s location is a strategic asset, enabling it to serve as a transport nexus for the region. The Khalifa Bin Salman Port has enhanced the country’s role as a key supplier of goods to Saudi Arabia, the region’s largest market. Bahrain is also linked to Saudi Arabia via the 25-km King Fahd Causeway, which has been expanded to handle increased traffic. A second road link, the King Hamad Causeway, was in the pre-construction phase as of early 2023. In addition, Bahrain International Airport opened its new passenger terminal in January 2021, strengthening the position of the country as a travel destination and centre for business in the wider region.

Bahrain Customs Affairs is similarly modernising eCustoms initiatives in an effort to further streamline processes and increase pre-clearance capabilities. For example, in 2020 the government body automated data collection and deployed artificial intelligence scanners for shipment inspections at the Saudi Arabia-Bahrain border. Infrastructure works are under way to improve urban transport as well. Work on the $2bn first phase of the kingdom’s metro network is expected to commence in 2023 after the tender is awarded. The metro grid will have four lines spanning 109 km, as well as electric, driverless trains. The underground system is set to significantly improve mobility across the kingdom.


Thanks to its colourful history, rich culture and diverse population, the kingdom attracts a large number of tourists, including many visitors from other GCC countries. In terms of the event calendar, the annual Formula 1 Gulf Air Bahrain Grand Prix is a significant driver of tourism. The Ministry of Tourism was absorbed by the Ministry of Industry and Commerce in 2015 to accelerate development of the sector, but in June 2022 became independent and autonomous, with Fatima Jaafar Al Sairafi appointed in June of that year as minister of tourism. The Bahrain Tourism and Exhibitions Authority (BTEA) – established in 2015 – has worked to formalise the sector, encourage investment in tourism facilities and spearhead development with the messaging “Bahrain. Ours. Yours.” to highlight the hospitable and welcoming culture of the country.

In 2022 the BTEA partnered with a leading online travel marketplace to drive tourism to the kingdom, in line with the government’s strategy to attract over 14.1m annual tourists to the country by 2026. In 2022 Bahrain was well on its way towards achieving those aims. At a board meeting of the BTEA in February 2023 Al Sairafi revealed that tourism revenue reached BD1.5bn ($4bn) in 2022, 50% over its goal of BD1bn ($2.7bn). The country welcomed 9.9m tourists that year, up by 19% over the target figure of 8.3m.

Climate & Geography

Bahrain’s climate consists of two seasons: a hot and humid summer, and a mild winter. April through October generally mark the summer months, with the average temperature around 40°C, with highs of up to 48°C. During the winter months – generally November through to March – the temperature ranges between 10°C and 20°C. The country’s annual rainfall averages 77 mm, which typically comes during the winter months.

Due to land-reclamation projects, the country has increased its overall landmass to more than 765 sq km, up from its original size of 665 sq km. The archipelago consists of 33 islands and is situated off the eastern shores of the Arabian Peninsula. The four principal islands are Bahrain Island – accounting for 76% of the total landmass – Muharraq Island, Sitra Island and Umm Al Nasan Island, all of which are interconnected by causeways. The King Fahd Causeway links Bahrain Island to Saudi Arabia. The capital, Manama, sits at the north-eastern part of Bahrain Island and is the most populous city. Other major cities include Riffa, Muharraq, Isa Town and Sitra. Bahrain International Airport is located on a 5-km strip along Bahrain’s northern coast that produces dates, almonds, figs and pomegranates.

Natural Resources

The country’s primary natural resources are oil, gas, fish and pearls. The traditional industries of fishing and pearl diving have diminished substantially since Bahrain began oil production, but they remain culturally significant. Despite the fact that the kingdom was the first GCC country to discover oil, it has smaller petroleum reserves than its neighbours.

Water is another finite natural resource, and the kingdom’s primary aquifer has been depleted by overuse. Bahrain depends on desalination for approximately 90% of its potable water, as freshwater sources are scarce.

Population & Language

Bahrain’s diverse population expanded from 1.5m in 2021 – with 53% being expatriate workers – to 1.8m in 2023. Due to the large size of the foreign workforce, males account for more than 60% of the population. According to the World Bank, 90% of people live in urban areas, with most in the Capital Governorate that includes Manama.

The official language of the kingdom is Arabic. There are several local dialects, however – some closer to Khaleeji (Gulf) Arabic and others closer to Iraqi Arabic. English is widely spoken due to the sizeable expatriate community and international business environment. Most street signs and documentation include English, which is a compulsory second language in the education system. Nevertheless, cultural protection laws exist that require most signage to include at least an equal amount of Arabic with other languages. Other languages that are widely spoken in the country include Farsi, Urdu, Hindi, Malayalam and Tagalog.


Islam is the official religion of Bahrain; 98% of nationals are Muslim and adhere to either the Shia or Sunni denominations, but the kingdom is considered to be tolerant regarding the practice of different religious beliefs and freedom of religion is enshrined in the constitution. The 2010 census documented that 70% of the country’s population classified themselves as Muslim and 30% as members of other religions. The expatriate population includes substantial Christian, Hindu, Buddhist and Sikh communities. The country is also home to a small indigenous Jewish community that originally emigrated from Iraq in the late 19th century. Bahrain’s freedom of faith is considered a defining characteristic. It has been promoting this in travel forums for years, highlighting its ethnic and religious diversity.

Education & Training

Bahrain was the first Gulf country to initiate a public education system – for boys in 1919 and for girls in 1928. Since then, Bahrain has invested heavily in the education sector, and in 2021 the government spent 9.1% of its annual budget on education development. Bahrain’s literacy rate is among the highest in the Arab world, at 97.5% as of 2018, according to the World Bank.

In line with the goals of Bahrain Economic Vision 2030, the governmental Education & Training Quality Authority develops standards for learning institutions. Furthermore, employers of expatriates must make mandatory contributions to Tamkeen, the semi-autonomous government agency charged with the development of the private sector. The funds are then invested in Bahrain’s training and employment support system, with a view to cultivating the local workforce.

For its part, the Bahrain Institute of Public Administration aims to improve the technical and soft skills of workers in the government sector. Focuses include sharing knowledge by bringing in outside experts and offering services to other governments in the GCC. In higher education, a number of the private universities that operate in Bahrain are partnered with international institutions, such as the British University of Bahrain and the American University of Bahrain, which officially opened its doors in the 2019/20 academic year.

Health Care

Bahrain has historically led the GCC countries in terms of health care. The American Mission Hospital (AMH), established in 1902, is the region’s oldest health institution. Bahrain created the Ministry of Health in 1973 and modelled policies on the successful operations of the AMH. The government subsidises health care costs for all citizens.

In an effort to reduce costs and improve service quality, the Supreme Council of Health has developed an e-health initiative that connects the country’s hospitals to a central database of medical records. In 2018 the Parliament and the Shura Council approved Law No. 23 – known as the Health Insurance Law – which applies to all nationals, residents and visitors. Its overarching goal is to increase the privatisation of the health care sector. The law requires that expatriates and their employer pay a set amount of health insurance contributions.