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Bahrain economy growing despite oil price slump
Mercedes Formula One driver Lewis Hamilton of Britain takes the "Michael Schumacher turn" as he drives his car during day four of Formula One's final pre-season test at Bahrain International Circuit (BIC) in Sakhir, south of Manama, March 2, 2014. (photo by REUTERS/Hamad I Mohammed)
Bahrain's economy continues to perform well, recording a 5.1% growth rate in the third quarter of last year, and it is expected to record 4.2% growth for the entire year of 2014, compared to 5.3% in 2013.
This is due to a decline in oil prices during the third quarter of the year, as the oil sector growth is expected to decline from 15.3% in 2013 to 2.9% in 2014 [of the national economy]. Meanwhile, the non-oil sector growth is expected to increase from 3% in 2013 to 4.6%, according to estimates by the Economic Development Council (EDB).
While the EDB estimates were not far from our predictions for the growth of Bahrain's economy in 2014, especially that we expected some decline in oil prices after years of rising prices, saturation in inventories and slow growth of Asian economies.
This is not to mention the increasing role of the alternatives to oil, therefore the decline has been greater than we expected, which is probably due to unforeseen factors — be they direct or indirect — associated with geopolitics that have also contributed to this decline.
However, in all cases, we are still convinced that the Bahraini economy is characterized by strong foundations and props that have made it resilient and able to adapt to oil market fluctuations — a statement that is also confirmed by the EDB.
Bahrain's economy has strongly benefited from infrastructure development in 2014: strategic and vital projects relating to the infrastructure, energy and basic services, which were carried out during last year and were supported by the Gulf plan that amounted to $10 billion, in addition to the five-year government spend plan worth $22 billion, both of which played a vital role in the growth last year. This is especially true in the construction sector, which recorded a growth rate of more than 12%.
Other sectors have also witnessed growth in parallel to the average non-oil sector growth, such as hotels, tourism, and social and personal services (which mostly consist of private health care and education). Moreover, commercial activities expanded by 4.6%, retail by 4.4% and manufacturing by 4.1%, all of which reflect efforts to diversify sources of income.
In addition, the banking sector has been playing a vital role in the diversification of income sources in Bahrain. In fact, Bahrain includes 404 financial institutions and employs 14,000 people, more than two-thirds of whom are Bahrainis. The financial sector accounts for 16.7% of the gross domestic product, which is a large proportion and reflects the diversity and capacity of the financial sector. Moreover, total banking assets amounted to about $200 billion in September 2014.
Furthermore, the economic growth in the Kingdom of Bahrain during 2014, in addition to real estates and construction loans as well as social housing, have been reflected in the financial performance of Bahraini banks during the nine months ending Sept. 30, 2014.
According to the banking sector's financial data, a growth rate of 20% was recorded last year, amounting to 259 million dinars [$686.9 million], compared with 216 million dinars [$572.8 million] during the same period last year.
In parallel with the achievement of 2014, Bahrain has strengthened its position as a pioneering, commercial, investment and tourist hub in the region, topping the Arab countries in the Index of Economic Freedom, according to the American Heritage Foundation for that year. It also ranked two in the Arab world and seven internationally in terms of easy issuance of licenses for investment projects, according to the World Bank report.
Bahrain also ranked four among Arab countries and 44 worldwide among high human development countries, according to the UNDP program for 2014. This reflects an improvement in the standards of living and high per capita gross domestic product.
This is not to mention the ongoing efforts to provide jobs for the national labor force, implement many projects so as to improve the wages of local workers, and educate and employ graduates. This is in addition to other initiatives such as extending social protection, which promotes social stability and increases the economy productivity.
Read more: Bahrain economy growing despite oil price slump - Al-Monitor: the Pulse of the Middle East
