Bahrain's non-oil private sector forecast to grow 4.3% in 2018

Year-on-year expansion of Bahrain's construction sector accelerated to 6.7% in Q1, according to the Bahrain Economic Development Board
Bahrain's non-oil private sector forecast to grow 4.3% in 2018
According to the report, the forecast for growth comes in spite of a weaker performance in Q1 2018, when the economy was negatively impacted by a one-off maintenance-related reduction in oil production, which led to a 15 percent contraction in the oil sector.
By Bernd Debusmann Jr
Mon 13 Aug 2018 01:06 PM

Bahrain’s non-oil private sector is expected to grow 4.3 percent in 2018 with headline growth – a raw inflation figure - of 3.4 percent, according to a new report from the Bahrain Economic Development Board (EDB). 

According to the report, the forecast for growth comes in spite of a weaker performance in Q1 2018, when the economy was negatively impacted by a one-off maintenance-related reduction in oil production, which led to a 15 percent contraction in the oil sector. 

Non-oil sector growth in that quarter remained positive but slowed due to a combination of base effects after a period of accelerating growth and the lagging impact of forecast unevenness in infrastructure implementation in H2 2017. 

The EDB cited a number of factors for its positive economic outlook. After a period of subdued growth in the construction sector in 2017, the year-on-year expansion of the sector has accelerated to 6.7 percent in Q1. The EDB notes that construction has historically been a significant driver of growth in other non-oil sectors, suggesting that the manufacturing, trade, real estate and financial services industries are likely to benefit over the course of 2018. 

The growth of Bahrain’s construction sector, the EDB notes, is the result of a marked increase in the pipeline of projects tendered as part of the GCC Development Fund to a cumulative total of more than $5.1 billion, compared to less than $4.2 billion at the end of 2017. 

Additionally, expectations of more rapid growth in 2018 have also been underpinned by strong growth in lending activity, with Bahraini retail banks seeing a sustained increase in activity over the course of the last year. 

The annual rate of growth of bank loans rose from 2 percent in May 2017 to 11.2 percent in May 2018, with a majority of loans going to the private sector. 

“While growth in Q1 2018 reflected a one-off maintenance-related contraction in the oil sector, the broader economic data underpins our confidence in likely full year growth,” said Dr. Jarmo Kotilaine, the EDB’s chief economist. 

Dr. Kotilaine added that stronger regional growth dynamics, a benign liquidity situation in the banking sector, the renewed expansion in the construction sector and implementation of a large infrastructure project pipeline suggest growth is likely to accelerate over the course of the year as a new phase of construction growth helps to support activity across the economy.”

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