Complex Made Simple

Is Bahrain’s economy showing signs of recovery?

Bahrain may have been on the ropes, and the road ahead is tough as oil remains below $100, but signs of economic life are back

Pledged ($10bn) aid comes with strings attached as the plan, Bahrain says, was designed to save $2.1 billion annually. Diversification stimulated non-oil sector expansion 2.4% year-on-year in Q3 of 2018, led by the construction sector. Real Estate and Business Activities grew by 3.2% in the first nine months of 2018

Bahrain said in May it has received the first installment of a $10-billion rescue package from key Gulf allies aimed at balancing its budget by 2022.

The initial payment of $2.292 billion for the year 2018 had been received “in full”, the government said a statement carried by the official BNA news agency.

Bahrain gets 80% of its revenues from oil and it’s the only oil producer in the region that needed prices to climb beyond $100 a barrel to balance its budget in 2018, according to International Monetary Fund (IMF) estimates.

Pledged aid comes with strings attached as the plan, Bahrain says, was designed to save $2.1 billion annually. Al Arabiya news said the kingdom looks to curb its debt after years of low oil prices by cutting public expenditure and government waste, voluntary retirements for government workers and “redirecting” state subsidies.

Bahrain’s cost-cutting targets, aimed at eliminating the budget deficit by 2022, are ambitious, Fitch Ratings said in October 2018.

The next instalments to Bahrain’s treasury would continue until 2023.

2018 growth

Bahrain’s economy recorded a real growth of 4.65% and 6.5% in current prices during Q4 2018 compared to Q4 2017, said the Information & eGovernment Authority (iGA) in a new report, where the GCC Development Program has been significantly reflected in Bahrain’s economic infrastructure projects.

Bloomberg reports that diversification stimulated non-oil sector expansion 2.4% year-on-year in Q3 of 2018, led by the construction sector.

The Bahrain Economic Quarterly (BEQ) found that Bahrain’s annual real GDP growth of 1.6% in Q3 underpinned by expansion in the construction and manufacturing sectors, as well as increased infrastructure spending.

Trade Arabia reported that the non-oil sector registered a real growth of 3.2% qoq and the oil sector grew at a rate of 11.3% in real terms due to increased production.

The non-oil GDP grew by 3.2%.

Exports of local products were up 9% yoy January-November 2018.

Real Estate and Business Activities grew by 3.2% in the first nine months of the year.

Bahrain is seeing increased investment in technological modernisation and innovation with a rapidly growing FinTech cluster.

Bahraini bond performance

The nation’s bonds remain the best performers among Gulf peers this year, returning 3.8%, according to Bloomberg Barclays indexes.

Their inclusion in JPMorgan Chase & Co emerging-market bond indexes starting end-January is cushioning the blow, according to Arqaam Capital, a Dubai-based investment bank.

Bloomberg reported that based on the index weightings, flows into Bahrain will be as much as 45% of its outstanding bonds, compared with as much as 30% for other countries in the region.