High growth forecast for Bahrain (page 2 of 2)

The government services sector's contribution to GDP fell from 10.8% in 2001 to 10.6% in 2002.

The trade sector and transport and communication sector showed dramatic improvements in its contribution to the GDP as their share increased to 9.1% and 7.9% respectively in 2002. The education sector also contributed well with its contribution rising from 4.1% in 2001 to 4.5% in 2002.

Booming real estate and business activities contributed 9.8% to the GDP in 2002 while the construction sector contributed a further 4.2%. We believe that the contribution of real estate and construction sector is set to increase further in the next two years with the number of projects in the pipeline increasing tremendously.

The domestic demand remained strong in 2002 as it grew by an impressive 7.2% compared to 0.9% in the previous year. During 2002, government consumption increased by 2.8% while the private consumption, which forms a large part of the domestic demand remained almost flat. The gross capital formation, which is mainly the capital spending by the government and the private sector has remained in the range of 12-14% of GDP since the past few years.

However, in 2002 the gross capital formation showed robust growth and it stood at 17.3% of GDP in 2002 as compared to 13.3% in 2001. The strong growth in gross capital formation was mainly owed to the fact that the government investments increased by a whopping 68.5% to BD291.2mn as compared to the previous year.

Private investment, which had declined in 2001, also witnessed a healthy growth of 13.8% to BD255.9mn in 2002. In view of the government's plan of greater allocation for infrastructure and development projects, we expect further recovery in government spending. In addition, the healthy macroeconomic profile, rising corporate earnings are expected to boost private investments in the years to come.