Bahrain economy set for 5.3pc growth
Manama, October 15, 2013
Bahrain's economy is on course for a strong performance this year, with growth expected at 5.3 per cent, said a report citing an assessment by the central bank.
In its September newsletter, the Central Bank of Bahrain (CBB) said the kingdom's gross domestic product (GDP) growth is expected to ease to 4.2 per cent and 4 per cent in 2014 and 2015 respectively, reported the Gulf Daily News, our sister publication.
The CBB cites the latest issue of Bahrain Economic Quarterly, published by the Economic Development Board, as the source of the data, it stated.
The report notes the global economic outlook has displayed fairly consistent signs of improvement for the key advanced economies, most notably the US, even if risks still persist.
This has tested market mood about the emerging markets as the prospect of a gradual phasing out of quantitative easing by the Fed risks creating a much more challenging liquidity environment.
The report points out that Bahrain's oil sector seems to have returned to normal, following a protracted disruption in the offshore Abu Sa'afa field last year.
Production has largely normalised and with gradual output gains in the Bahrain Field, double-digit growth in the oil sector is expected.
Bahrain's non-oil output experienced a sharper than expected deceleration in the first quarter which seems to have been primarily linked to delays in approving the 2013-2014 budget.
Data on bank lending in the spring points to some lost momentum.
Fiscal policy and project spending should support non-oil growth in the second half of the year.
The state budget was approved in June with significant spending increases, some of them backdated to the beginning of the year.
At the same time, work is expected to begin on some of the projects financed from the GCC Development Fund.
This should permit a significant acceleration in non-oil growth in the second half of the year.
The global context is somewhat more promising. Although recurrent emerging market jitters are likely in the face of potential monetary tightening in the US, the global economy is looking slightly more robust.
Reversals are possible in view of the multitude of risks that still exist, but present configuration should prove supportive of growth in Bahrain.
The near-term outlook for the global economy seems characterised by growing optimism about the advanced economies with mounting anxiety about some of the more vulnerable emerging economies with current account deficits.
The mixed global outlook should be more supportive of oil prices, although significant volatility is expected.
Bahrain's fiscal breakeven price of $115 per barrel can be consistent with market realities if risks in the emerging market space prove short-lived.
Greater volatility would likely result in recurrent downward pressure on prices.
The impending recovery in the West will at some point begin to translate into upward pressures on interest rates, with negative implications for the cost of funding for Bahrain and local lenders.
The prospect of greater capital controls by some emerging markets may reduce the potential for global investment flows and have some adverse implications for foreign direct investment. It is likely, however, that interventions in the currency market will prove fairly limited in duration.-TradeArabia News Service
