Bahrain

Last Updated: May 9, 2025

The Kingdom of Bahrain is an island nation in the Arabian Gulf between Saudi Arabia and Qatar. The country has approximately 1.52 million inhabitants as of 2024, of whom just under half are foreigners. Manama, the capital, is the country’s only major urban center. The area of 760 square kilometers – about the size of the city of Hamburg – is predominantly desert. Only the northern coastal strip is arable, which represents around 2.7% of the land.

Bahrain declared independence from the United Kingdom in 1971 under the leadership of Sheikh Isa and soon pursued efforts toward regional integration, joining the Gulf Cooperation Council in 1981. In 1986, the King Fahd Causeway opened, linking Bahrain with the Saudi mainland, a symbol of the close economic and political ties between the two monarchies. In 2002, a constitutional reform transformed the emirate into a constitutional monarchy following calls for an independent judiciary and an elected lower chamber of parliament.

Bahrain is a member of the United Nations (UN), the Arab League, the Organization of Arab Petroleum Exporting Countries (OAPEC), the World Trade Organization (WTO), and a founding member of the International Renewable Energy Agency (IRENA).

Today, Bahrain is one of the most liberal economies in the world. The openness of the Bahraini market, its proximity to other key markets in the region, and favorable investment conditions and infrastructure make the country an attractive destination for foreign businesses. While Bahrain’s oil and gas reserves are modest compared to those of its neighbors, they remain a vital source of revenue. Petroleum processing and refining continue to be the country’s most important industries. In fact, the “Economic Vision 2030” was launched in 2008 to reduce heavy dependence on oil and gas exports and create new job opportunities for the growing young population. The strongest sectors of the industrial economy remain aluminum production and the textile industry. German companies export mainly machinery, motor vehicles and parts, and chemical products to Bahrain.

Bahrain has a well-developed service sector, which accounts for around 51.1% of its GDP in 2023. With over 170 banks and financial institutions, the kingdom is a leader in Islamic finance. A key economic policy objective is to develop Bahrain into a regional leader in finance and services, supporting a rapid post-pandemic economic recovery. Its central location in the Gulf region and compact geography make Bahrain an ideal hub for business with the large Asian markets.