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Bahrain's economy to grow 3.3% this year, must cut public debt - IMF

·1 min read

DUBAI, Feb 14 (Reuters) - Bahrain's economic recovery fromthe COVID-19 pandemic will be gradual, with growth projected at3.3% this year after a 5.4% contraction in 2020, theInternational Monetary Fund said on Sunday.

The tiny Gulf state has been battered by the twin shocks ofthe coronavirus crisis and lower oil prices, which pushed itsoverall fiscal deficit to 18.2% of gross domestic product lastyear from a 9% shortfall in 2019, the Fund said.

Bahrain has accumulated a large pile of debt since the2014-2015 oil price shock. A $10 billion financial aid programmefrom Gulf allies helped it avoid a credit crunch in 2018.

Public debt rose to 133% of GDP last year from 102% in 2019,the IMF said.

"Once the recovery firms, ambitious and growth-friendlyfiscal adjustment set within a credible medium-term framework isneeded to address Bahrain's large imbalances, put governmentdebt on a firm downward path, and restore macroeconomicsustainability," the Fund said in a statement.

"The adjustment would also help rebuild external buffers,solidify the exchange rate peg, which continues to serve Bahrainwell as a monetary policy anchor, and support access tosustainable external financing."

The IMF said Bahrain had moved swiftly to address the healthand economic impacts of the COVID-19 pandemic, providing rapidaccess to vaccinations to those most in need and liquidity tobusinesses hit hard by lockdown restrictions.

The projected 3.3% growth this year reflects an expected3.9% recovery in the non-oil sector, boosted by widespreadvaccine distribution.

The IMF also welcomed the central bank's support for banks,but warned about emerging credit risks amid weakened growth.

"Reducing the role of government as an employer could alsohelp create a more dynamic and attractive private sector andalleviate fiscal pressures," it said.

(Reporting by Davide Barbuscia; Editing by Pravin Char)