MANAMA- The Economic Development Board (EDB) recently said that the Kingdom’s non-oil sector is well positioned for growth in 2014 following a sharp rebound in the oil sector in 2013.
The first Bahrain Economic Quarterly (BEQ) for 2014 also highlights expectations of further growth in key sectors such as infrastructure, with predictions of increasing momentum in the coming months. The forecasted growth will have a marked positive impact on contractors, confidence, and increased bank credit growth.
The report identifies three factors contributing to the non-oil sector growth and comeback, including the delay in incremental government spending. As a result of this, the annual growth rate of the government services sector in the national accounts slowed down sharply last year. However, government expenditure for this year is expected to be more robust compared to last year.
The second reason behind the non-oil sector growth is the launch of a number of infrastructure projects, worth $4.43 billion according to recent reports by Ministry of Finance. A number of infrastructure projects which were approved by the Gulf Development Fund are due to be launched in the coming months. Third, the banking sector’s liquidity and low loan-to-deposit ratios, have also led to the acceleration of project development and improved confidence levels.
According to the latest official estimates, which the EDB reviews in a separate update than the BEQ, the real GDP growth rate in 2013 reached 5.3%, supported by the robust 15.3% expansion in the hydrocarbons sector, and growth of just over 3% in non-oil sectors. The EDB expects non-oil growth to accelerate to more than 4% this year and even as the oil sector is likely to remain more or less flat, headline GDP growth should come in at 3.5-4%. The EDB’s current estimate is 3.7%.
The hydrocarbons sector is expected to experience a year of stability in 2014 as the main offshore Abu Sa’afah oil field looks likely to remain at full capacity. As a result of various pilot projects being evaluated, stable production from the onshore Bahrain field is likely to result in a modest contribution from the hydrocarbons sector to GDP growth this year.
According to the BEQ, the EDB has attracted approximately $114 million of foreign investment in 2013 from North America, Europe and Asia, 12% more than in 2012. In 2013 alone 35 foreign companies established business in Bahrain, creating over 800 jobs in financial services, logistics, manufacturing, healthcare, technology and ICT sectors.
The report also highlighted the positive growth of the labour market in Bahrain, where private sector employment went up by 5.2% in Q3 of 2013, reflecting a recovering economy in labour driven sectors and an improvement in labour market conditions. At the same time, official rates for unemployment have decreased from 4.5% in November, to 4.3% in December.
On a global perspective, and in spite of uncertainty on the current economic scene, developed economies seem to have a healthy outlook, while uncertainty clouds the future of emerging economies. In terms of the economic situation in the Gulf region, the BEQ expects the non-oil sectors to make a positive comeback in the region and lead the forecasted economic growth, paired with lower, government controlled hydrocarbons sector contribution to the overall growth. According to the report, the Kingdom of Bahrain can take advantage of the positive economic outlook in the region by boosting investor confidence levels, thus boosting growth in the private sector.-BNA