Bahrain’s real GDP ‘to grow by 2.55 per cent this year’

MANAMA: Bahrain’s real GDP will grow by 2.55 per cent this year, well above the 1.4pc growth forecast for the GCC region as a whole, predicts a new report.

‘Economic Update: Middle East Q1 2021’, compiled by Oxford Economics and commissioned by the Institute of Chartered Accountants in England and Wales (ICAEW), expects the rollout of coronavirus vaccines should allow a return to relative normality in the Middle East in the second half of 2021, while much of the region’s economies will benefit from higher commodity prices and stronger external demand.

Overall, according to ICAEW, the GCC GDP is estimated to have contracted 5.4pc in 2020. The Middle East’s GDP forecast for this year stands at 2.5pc, similar to the average pace from 2010 to 2019 (2.6pc), whereas the region’s unprecedented decline in 2020 is projected at 5.2pc.

Scott Livermore, ICAEW economic adviser and chief economist at Oxford Economics, said: “In the first quarter of 2020, the pandemic brought Middle East economies to a temporary standstill. Today, we are encouraged by the steps regional governments are undergoing to bring back normalcy. However, the continued uncertainty in the global market puts more pressure on the oil-reliant economies to increase their non-oil revenues.”

The report observed that 2021 has got off to a slow start for the global economy due to containment measures aimed at bringing Covid-19 numbers under control. Likewise, countries in the Middle East have had to clamp down, imposing restrictions on travel and their domestic economies to curb the spread of the virus.

The vaccine rollout has been uneven but has progressed particularly well in the UAE and Bahrain, where a relatively large percentage of the population has been vaccinated compared to neighbouring countries and global peers.

Expectations of strengthening activity and rising demand have lifted sentiment, pushing oil prices up to $66 per barrel in late February (up from a low point of $9pb in April 2020).

The oil price outlook has also been supported by ongoing supply restraint from Opec+ producers.

The group plans to increase output only modestly in the months ahead, to sustain a reduction in inventory levels, with Saudi Arabia maintaining an additional voluntary production cut of one million barrels per day through April.

Although deficit financing needs will decline in 2021, most countries will continue to borrow in international debt markets to fund diversification programmes or refinance maturing debt at low rates.

ICAEW regional director for the Middle East, Africa and South Asia Michael Armstrong said: “While Covid-19 vaccine rollouts are underway, Middle Eastern governments must continue to develop sectors and industries that generate net value for the economy. Increasing non-oil revenues is a challenging task in these times so innovation will be vital to the region’s economic recovery.”




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