These days, mid-week Manama is quiet, the traffic is as strong as ever and local officials are keen to proclaim an air of quiet confidence about the prospects of the Bahraini economy. And if the headline news has tended to focus on domestic unrest, there are some indicators that the island's economy is getting back on its feet.
But it is something of a slow process. The country’s economy has had to cope with a comparative paucity of natural resource receipts in comparison to the rest of the GCC, has had a thriving financial sector hit via exposure to the global economic crisis, and is trying to recover amidst a fragile political outlook.
With all that to bear in mind, it’s somewhat surprising that the economy is performing as well as it is currently. In the second quarter, GDP grew by 4.3 percent, after growing by 5.9 percent in the first quarter. However, those sets of figures are tempered slightly by the fact that the same quarters a year ago were subject to a slump due to pro-democracy protests. Quarter-on-quarter, however, GDP growth declined for the first time since the beginning of 2011, by 1.3 percent.
For Kamal Bin Ahmed, the acting chief executive of the country’s Economic Development Board, the second-quarter figures appear to be of little concern.
“Our budget is expanding, and it will expand further, especially with the money that we are getting from the GCC countries,” he points out. “It will be used to build more infrastructure, more housing units — all of these will be used to expand the economy and create a bit more of a buzz.
“This year we are expecting GDP growth of between four-five percent — maybe there was a dip in the second quarter, but we know that it will be between four-five percent by the end of the year.”
The Economic Development Board (EDB) has itself gone through a period of change since last year’s protests. Both it and Mumtalakat, the country’s sovereign wealth fund, have seen their chief executives move away from the public sector in recent months.
Sheikh Mohammed Bin Isa Al Khalifa, the affable former CEO of the EDB, has left to chair Tamkeen, an agency that helps locals find jobs and fosters private enterprise. In his place is Ahmed, who shares what is viewed as one of Bahrain’s top jobs with his brief as transport minister. Given the EDB’s role — which is both to oversee the country’s economic development and marshal foreign direct investment (FDI) into Bahrain — there’s an argument to be made that Ahmed’s ministerial brief might mean that he has too much on his plate.
So far, however, his stewardship of the agency appears to be going according to plan. In terms of FDI, Ahmed says this figure topped $300m during 2011, which, taken as a percentage of GDP, puts it amongst the region’s best performers. Given that the World Bank estimated Bahrain’s GDP at $22.95bn during 2011, FDI equates to around 1.3 percent of GDP, a marked increase against the 0.7 percent recorded during 2010.
One of the benefactors has been the financial industry, which makes up a quarter of Bahrain’s economy. Foreign investment into the sector rose by three percent in 2011, year-on-year, as the Gulf state’s well-established and strongly regulated banking industry recovers from the global financial fallout.
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