By Sarah Townsend
Central bank governor says kingdom's non-oil economy has been 'resilient' despite challenges
The governor of the Central Bank of Bahrain (CBB) has forecast 3.5 percent non-oil GDP growth for 2017, saying the country has managed to adapt to “new economic realities”.
However, he admitted that rating agencies’ downgrading of Bahrain to ‘junk’ status last year was concerning.
Rasheed Mohammed Al Maraj said his forecast 2017 GDP growth for Bahrain was 3.5 percent, representing a slight drop from his projected 3.6 percent in 2016 – the figures for which have not been finalised.
“Banks have managed to adapt to new economic realities and I would not expect the outlook for 2017 to be much different from last year,” he told delegates at the GCC Financial Forum in Manama this week.
“The non-oil sector in Bahrain has been doing reasonably well, and economic diversification has made the country very resilient against the challenges we have seen in the last 2-3 years.”
Al Maraj said there had been a rise in new infrastructure and real estate projects in Bahrain in recent months, which would serve to support GDP growth in 2017, while the anticipated marginal recovery in oil prices to above $60 per barrel this year would lend it further momentum.
The government has introduced a mix of spending cuts, subsidy reforms and revenue enhancement measures in response to challenging local and global economic conditions and the full positive impact of this has yet to be seen, he added.
However, he admitted that ratings agencies’ downgrading of Bahrain last year was of concern. “We are very much worried by this, yes,” he said. "Discussions with rating agencies in the last year have been very intense."
Standard & Poor’s, Fitch Ratings and Moody’s all downgraded Bahrain to BB or BB+ in 2016, giving the sovereign ‘junk’ or ‘non-investment’ status.
S&P and Fitch have since amended their ratings to B- and B+, respectively. Al Maraj said: “We continue to engage with them in a positive way.”
Looking further ahead, the governor said the planned implementation of value added tax (VAT) across the GCC would account for about 3-4 percent of Bahrain’s GDP and boost revenues by an estimated $200-$300 million per year.