Non-oil private sector helps lift Bahrain’s real GDP in Q2

The gross domestic product of Bahrain, the smallest of the Arabian Gulf economies, accelerated sharply in the second quarter of the year helped by a rise in crude prices and an expansion of the non-oil private sector.

The kingdom’s real GDP growth, an inflation-adjusted measure that reflects the value of all goods and services produced by an economy in a given year, rose to an annual 2.4 per cent from the previous quarter,

Bahrain Economic Quarterly

Report (BEQ), produced by the Bahrain Economic Development Board (EDB) showed.

“Bahrain’s impressive improvement in the second quarter was thanks to a broadbased recovery across the whole economy. In particular, the expansion of Bahrain’s non-oil GDP stands out in the regional context,” said Jarmo Kotilaine, the chief economist at EDB.

“With the oil industry now only accounting for less than 20 per cent of Bahrain’s GDP, growth dynamics are critically linked to non-oil drivers. This compares to the situation in much of the rest of the region, where the stronger growth has been led by higher oil prices and production.”

The kingdom’s over all GDP is projected to grow by 3.2 per cent this year, down from 3.8 per cent in 2017, according to the International Monetary Fund. Bahrain had a 13.2 per cent fiscal deficit last year and 18 per cent in 2016. It has seen its debt to GDP ratio surge to above 80 per cent from 43.6 per cent in 2013.

Bahrain’s Gulf allies – Saudi Arabia, the UAE and Kuwait – in October provided it with a $10 billion aid package to stabilise its economy and prevent a potential credit crunch, The amount has helped the country restructure its economy and to implement fiscal reforms that will allow Bahrain to rein in its budget deficit.

However, the financial assistance will provide only shortterm relief, helping Bahrain to avoid a currency devaluation, meet immediate debt payments, dispel speculation on the currency peg to the US dollar and allow it to borrow from international debt markets at cheaper interest rates, analysts said at the time.

According to the quarterly report, Bahrain’s non-oil GDP expanded by an annual 2.8 per cent in the quarter ending June 30, driven by the construction sector that expanded by 6.7 per cent and manufacturing, which climbed 4.5 per cent.

The total value of projects facilitated by the EDB in the first nine months of 2018 climbed 138 per cent year-on-year, the report noted.

Of the 76 companies that have invested in Bahrain in the first three quarters of 2018, 31 belong to the manufacturing sector, highlighting the sector’s strength, the EBD said.