MANAMA: Faster non-oil growth in Bahrain this year will be underpinned by an acceleration in pace of project implementation, according to the latest Bahrain Economic Quarterly.
The report by the Economic Development Board (EDB) projects the kingdom’s non-oil sector to grow 4.3 per cent in 2018, with headline growth of 3.4pc.
The forecast follows a strong performance in 2017, in which the Bahraini economy was the fastest-growing in the GCC with headline growth of 3.8pc and 4.8pc growth in the non-oil sector.
Analysing the report, the EDB’s chief economist Dr Jarmo Kotilaine told a media roundtable yesterday that expectations of more rapid growth this year are also underpinned by strong growth in lending activity.
“Bahraini retail banks have seen a clear and sustained increase in activity over the past year. The annual rate of growth of bank loans shot up from 2pc in May 2017 to 11.2pc in May 2018, with the majority of new loans going to the private sector,” he added.
“Beyond this, companies in Bahrain can be expected to benefit from a much more favourable regional backdrop with headline growth set to accelerate markedly from last year’s low.
At the same time, the oil price environment is beginning to inject new liquidity into the regional economy.
All this should have positive indirect effects on Bahrain through visitor flows and regional investments.
The forecast for strong growth across the year as a whole comes in spite of a weaker performance in the first three months of 2018.
The country’s growth in Q1-2018 was negatively impacted by a one-off maintenance-related reduction in oil production, leading to a 15pc contraction in the oil sector.
Non-oil sector growth in the quarter remained positive but slowed due to a combination of base effects after a period of accelerating growth and the lagging impact of anticipated unevenness in infrastructure project implementation in the second half of 2017.
However, the economic outlook is favourable due to a number of factors.
“While growth in Q1 2018 reflected a one-off maintenance-related contraction in the oil sector, the broader economic data underpins our confidence in likely full-year growth,” said Dr Kotilaine.
“The stronger regional growth dynamics, a benign liquidity situation in the banking sector, the renewed expansion in the construction sector and implementation of a large infrastructure project pipeline suggest growth is likely to accelerate over the course of the year as a new phase of construction growth helps to support activity across the economy.”
After a period of slower growth in 2017, the year-on-year rate of real expansion in the construction sector has accelerated markedly to 6.7pc during the first three months of 2018.
Construction has always been an important driver of growth in other non-oil sectors and the renewed momentum in the first quarter suggests sectors such as manufacturing, trade, real estate and financial services are likely to benefit over the course of the year.
This growth in construction is partly the result of a rapid increase in the pipeline of projects tendered as part of the GCC Development Fund to a cumulative total of just over $5.1 billion. This compared with less than $4.2bn at the end of 2017, said the report.
At the same time, private and semi-government projects are making headway.
The Bapco modernisation project is the largest investment in Bahrain’s history and getting underway this year.
Development activity is also starting in the Khaleej Al Bahrain field and the deep gas finds.