Bahrain’s economy to grow 3.7pc

MANAMA: Bahrain’s economy is seen growing at 3.7 per cent in real terms this year, as per the latest government estimates.

Revealed in the Q4-2020 Bahrain Economic Quarterly Report, the kingdom’s projected nominal GDP growth rate is 11.4pc for 2021 as global and regional prospects generally improve due to global vaccine rollouts and continued policy stimulus.

Real GDP is an inflation-adjusted measure that reflects the value of all goods and services produced by an economy in a given year, as against nominal GDP with does not factor changes in prices of goods and services.

This means that if inflation is positive, real GDP will be lower than nominal, and vice versa.

Based on preliminary national accounts data for Q4-2020 provided by the Information and eGovernment Authority, the report also states that continued output controls by the Opec+ has boosted oil prices, which should begin to permit gradual normalisation of production.

All of these should be supportive of a fairly broad-based economic recovery in Bahrain in 2021-2022, it adds.

In compiling the report, the Finance and National Economy Ministry recorded 3.3pc real growth in the non-oil sector from Q3-2020 level, with improvement led by strong rebounds in financial firms and transport and communications, which posted quarter-on-quarter (QoQ) growth of 11.6pc and 9.4pc, respectively.

Several financial indicators also saw growth over the quarter as indicated in the monthly statistical bulletin released by the Central Bank of Bahrain.

Hotel occupancy rates were among several other indicators that began to show positive growth during the fourth quarter.

Bahrain’s GDP in Q4-2020 still remained 5.5pc below the Q4-2019 level (down 7.3pc in nominal terms).

However, the decline is less pronounced than during the two previous quarters, highlighting the progressive normalisation of economic activity, especially in areas that are not heavily dependent on global mobility.

On the other hand, and in line with forecasts, Bahrain’s economy is estimated to have contracted by 5.8pc in real terms and by 10.2pc in nominal terms in 2020 compared to 2019.

Since the pandemic-related disruptions mainly affected non-oil activities, the non-oil sector as a whole led the decline with a 7pc correction in real terms (and 7.3pc decline in nominal terms).

This was largely due to the effects of the Covid-19 pandemic, with hotels and restaurants registering the largest decline of 43.9pc year-on-year (YoY).

Financial services was the only sector to register a growth during the year, with an increase of 1pc compared with the previous year.

The oil sector was virtually flat with a 0.1pc YoY real drop, although lower oil prices translated into a 28.5pc decline in nominal terms.

In terms of their contribution to the overall real GDP, non-oil sectors contributed 82.3pc to GDP, with the financial corporations sector continuing to be the largest non-oil sector during Q4-2020, accounting for 19pc of the total, followed by the manufacturing sector (14.5pc) and the government services sector (13pc).

New growth forecasts for Bahrain by the International Monetary Fund (IMF) and ratings agency Fitch are largely in line with government figures.

Expecting most economies to recover at a faster pace this year than previously estimated, the IMF has earlier this month revised Bahrain’s GDP growth estimate to 3.3pc this year from a forecast of 2.3pc last October.

Last week, Fitch projected real GDP growth of 3.2pc in 2021 and 3pc in 2022 for the kingdom, with oil GDP flat and non-oil growth of 4pc and 3.7pc, as the global economy recovers and vaccination programmes allow for a gradual reopening of travel and tourism and easing of remaining domestic restrictions.

The agency sees the gradual normalisation bringing Bahrain’s real and nominal GDP back above 2019 levels in 2022.

The government has forecast real GDP growth of 3.2pc next year, whereas the IMF sees Bahrain’s economy growing at 3.1pc.




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