Higher govt spending spurs Bahrain’s economy

Manama, 2 hours, 48 minutes
ago

Bahrain’s economy, bouncing back from a year ago with most sectors experiencing strong growth, is expected to grow by at least 2.4 per cent this year, driven by increased manufacturing and government spending.

Real gross domestic product (GDP) grew by 4.2 per cent in the second quarter, relative to the same quarter last year after businesses began to recover from the events of 2011, according to a report in our sister publication the Gulf Daily News.

But relative to the first quarter of the year, GDP fell by around 1 per cent, which makes it the first negative quarter-on-quarter growth since last year.

The fall was almost entirely due to declining volumes from the Abu Sa’fa field, while the non-oil sector continued to rebound by a remarkable 8.1 per cent year-on-year, according to the second quarter report by the Economic Development Board.

Most sectors have by now experienced a clear rebound since last year, including mainstays such as construction, manufacturing and hotels and restaurants.

This points to good progress of the increasingly broad-based recovery.

Virtually all the second quarter weakness has come from temporary production disruptions in the oil and gas sector, which contracted by 7 per cent relative to the first quarter, and 10 per cent relative to the second quarter of 2011.

The Central Informatics Organisation has rebased real GDP, and the base year is now 2010 instead of 2001.

This means that oil and gas extraction now makes a much bigger contribution to GDP reflecting the higher oil prices in 2010, and thus the fall in it had a proportionately greater impact on the overall GDP.

“Despite the recent reversals, we expect oil production to increase in the second half of the year,” the report said.

“Oil production is expected to increase over the coming decade, in particular due to the project to raise production in the Awali field by Tatweer Petroleum.

“The target is to double production within the first five years of operations by using enhanced production techniques,” the report said.

“There has been a particularly strong rebound in parts of the service sector that recorded the sharpest fall last year,” the report added.

“For instance, the hotels and restaurants category grew by 6.5 per cent in the first quarter and 5.5 per cent in the second quarter. This sector took one of the hardest hits in 2011, when it fell by 17 per cent compared to the previous year.

“Construction grew by 10 per cent in the first quarter and shrunk by 0.7 per cent in the second quarter compared with the first, reflecting government spending on infrastructure and housing.

“Manufacturing followed a similar trend, growing 13 per cent in the first quarter over the fourth quarter of last year,” the report said.

“Growth is likely to pick up further in 2013 due to a growth in infrastructure spending, as more than 20,000 housing units are set to be built by the government in the coming five years,” it added.
High standing maintained

Bahrain has also attained impressive results in a number of recent global rankings.

Although some of this standing has been eroded of late, Bahrain’s position remains highly competitive on a global scale, according to a special review in the Economic Development Board’s second quarter report.

The indices that showed improvement were global competitiveness, corruption perception, education development index and travel and tourism.

Evaluation of the reports suggests that Bahrain’s main comparative strengths include its low inflation, favourable tax regime and strong banking and finance sector.

It also has a high standard of human development, efficient business regulations and ICT readiness.

Bahrain occupied the 42nd position out of 187 countries in the 2011 Human Development Report published by the United Nations Development Programme.

The kingdom continues to feature in the category of Very High Human Development countries.

Other countries in this category are Norway, Australia, the Netherlands, the US and New Zealand. – TradeArabia News Service

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Bahrain | economy | EDB | GDP | manufacturing | Government spending |