According to a January 2006 report by the United Nations Economic and Social Commission for Western Asia, Bahrain has the fastest growing economy in the Arab world. Bahrain also has the freest economy in the Middle East and is twelfth freest overall in the world based on the 2011 Index of Economic Freedom published by the Heritage Foundation/Wall Street Journal.
In 2008, Bahrain was named the world’s fastest growing financial center by the City of London’s Global Financial Centres Index. Bahrain’s banking and financial services sector, particularly Islamic banking, have benefited from the regional boom driven by demand for oil. Petroleum production and processing is Bahrain’s most exported product, accounting for 60% of export receipts, 70% of government revenues, and 11% of GDP. Aluminium production is the second most exported product, followed by finance and construction materials.
Economic conditions have fluctuated with the changing price of oil since 1985, for example during and following the Persian Gulf crisis of 1990–91. With its highly developed communication and transport facilities, Bahrain is home to a number of multinational firms and construction proceeds on several major industrial projects. A large share of exports consist of petroleum products made from imported crude oil, which accounted for 51% of the country’s imports in 2007. Bahrain depends heavily on food imports to feed its growing population; it relies heavily on meat imports from Australia and also imports 75% of its total fruit consumption needs. Since only 2.9% of the country’s land is arable, agriculture contributes to 0.5% of Bahrain’s GDP. In 2004, Bahrain signed the US-Bahrain Free Trade Agreement, which will reduce certain trade barriers between the two nations. Due to the combination of the global financial crisis and the recent unrest, the growth rate decreased to 2.2% which is the lowest growth rate since 1994.
Unemployment, especially among the young, and the depletion of both oil and underground water resources are major long-term economic problems. In 2008, the jobless figure was at 4%, with women over represented at 85% of the total. In 2007 Bahrain became the first Arab country to institute unemployment benefits as part of a series of labour reforms instigated under Minister of Labour, Dr. Majeed Al Alawi.