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Fri 24 Apr 2009 08:12 AM

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Bahrain's GDP to grow despite global downturn

Oil kingdom's economic development board COO sees economic growth at 2-5%.

Bahrain’s economy will still grow in 2009 despite the impact of the global financial downturn, the chief operating officer of the kingdom’s Economic Development Board has said.

Gross domestic product (GDP) at constant prices in Bahrain would advance between two and five percent but it would not be before the next quarter before a more precise figure would be known, said Kamal Ahmed, chief operating officer of Bahrain’s Economic Development Board.

“During the next two years I think this crisis will hold off a lot in Bahrain,” he told Arabian Business.

He said the drivers for Bahrain’s future growth were the strength of its financial sector, inflows of foreign direct investment (FDI), and the high quality of its human resources.

Bahrain would also benefit from economic links with its close neighbours Saudi Arabia, the largest oil exporter, and Qatar, the largest exporter of gas.

However, Jane Kinninmont, an economist covering Bahrain for the Economist Intelligence Unit (EIU), said she expected GDP growth this year to be between two and three percent.

Five years of soaring prices of oil, the island’s chief revenue source, enabled Bahrain to achieve an average growth of 6.9 percent between 2003 and 2008, she said.

“Government spending has been a big contributor to growth and the fact that its revenue will fall this year will constrain the government’s ability to spend more money, so hindering growth,” said Kinninmont.

A slide in FDI, a fall in regional demand for Bahrain’s exports, combined with a slower growth of Saudi Arabia, a key contributor to the island’s tourism industry, would also inhibit  growth, she said.

The Ministry of Finance has said it expects the country to run a deficit of 684m Bahraini dinars ($1.8bn) this year and 728m Bahraini dinars ($1.9bn) next year.