Economic Growth in Bahrain: The Contribution of Multifactor Productivity

With the process of expansion and the structural transformation taking place in Bahrain, it is crucial to measure and analyze the growth rates of gross domestic product (GDP), gross output and multifactor productivity (MFP) to develop proper policies that are in line with the new economic vision of Bahrain, known as Vision 2030. Thus, this paper comes with two main objectives: first, to provide explainable estimates for the growth rate of the gross output in the Bahraini economy and secondly to identify the main sources of the growth. The main findings of this study show that the annual growth rate of the gross output in Bahrain ranged from a maximum of about 11.7% in the year 2006 to a minimum of about 7.7% in the year 2002. The average annual growth rate of gross output over the time period 2002–2008 was 9.43%. The empirical findings also show that the MFP’s annual growth rate was relatively low over the study time period. Consequently, it could be concluded that the relatively high growth rate of gross output in the Bahraini economy was mainly due to the high growth rate of other inputs (M) over the last few years. The study concludes that there is an urgent need to improve MFP in Bahrain to contribute significantly to the output growth rates. Therefore, the study calls for further research to identify the main components that contribute to the growth of MFP in Bahrain and its decomposition.