Bahrain’s non-oil economy outdid growth projections, expanding by five per cent in the first quarter, according to an assessment by the Economic Development Board (EDB).

The EDB’s latest quarterly review also showed that the kingdom saw broad-based real GDP growth of 2.9 per cent, and strong labour market activity, with employment increasing by five per cent compared with the same period last year, said a report in the Gulf Daily News (GDN), our sister publication.

The non-oil sector’s growth reflects in part the continued build-up in infrastructure project activity, with private education and healthcare along with construction and transportation and communications found to be the fastest growing parts of the economy.

The non-oil sector constitutes more than 80 per cent of Bahrain’s GDP.

According to Khalid Al Rumaihi, the chief executive of the semi-private autonomous agency responsible for formulating the country’s future economic development strategy, the strong performance was a reflection of Bahrain’s diversification efforts over the past decade and the general resilience of the GCC economies at a time of doubt about the global recovery.

“Even as the hydrocarbons sector experiences a decline due to seasonal maintenance, headline real GDP expanded by 2.9 per cent and we continue to project robust growth throughout 2015 and 2016,” he said in a statement.

Despite global economic challenges, the report finds that forward-looking indicators point to a high degree of continuity in the regional non-oil economy, reflecting the strength of key structural growth drivers and the commitment of regional governments and investors to long-term projects.

The social and personal services sector – primarily made up of private sector healthcare and education activities – grew by 8.3 per cent year-on-year, overtaking the hotels and restaurants sector as the fastest-growing sector.

Strong growth of 7.5 per cent year-on-year was reported in the construction sector, which is in line with the sector’s momentum that became apparent in the second half of last year and reflects continued infrastructure activity, the report said.


Growth in the transport and communications sector followed closely with a 7.3 per cent year-on-year expansion.

The manufacturing sector also saw 5.9 per cent year-on-year growth.

The report also found that infrastructure activity had a marked effect on the labour market.

The increase in total employment occurred at its quickest pace since the second quarter of 2013, and was driven by the private sector, which represented 89 per cent of the annual growth in total job creation during the first three months of the year.

A fall in the unemployment rate was also reported in the first quarter, reaching 3.5 per cent in March – a level last seen during the third quarter of 2012.

In spite of oil price volatility in the second half of last year, the country’s fiscal performance has also seen an improvement.

The report says according to last year’s consolidated final accounts, government revenues rose and expenditures declined by 11 per cent each.

Bahrain is set to invest over $22 billion in key infrastructure projects over the coming years, which aims to spur public and private sector participation across the manufacturing, energy, healthcare and education sectors.

This includes a commitment to build 25,000 housing units over the coming four-year period.

Bahraini economist Dr Akbar Jaffari, who’s also the chief executive of Jafcon Consultants, told the GDN that the data was a good sign, implying momentum in the right direction, which now needed to be sustained.

According to him, the non-oil sector would have grown by about seven per cent when seen at the end of the year.

“I also don’t think the government’s plan to phase out subsidies is going to have a negative impact on growth.

“I feel that subsidies are a kind of harmful benevolence and should have been removed 25 years ago,” Dr Jaffari said.

“Subsidies are designed to benefit only the economically disadvantaged and when applied generally lead to wastages, which cannot be allowed to continue.

“The UAE government’s decision to deregulate fuel prices is a welcome step and needs to be emulated by others in the region,” he added.


The EDB’s Bahrain Economic Quarterly for the June quarter was released yesterday (July 22) and is available for download on www.bahrainedb.com. - TradeArabia News Service