Bahrain's economic growth will continue to remain robust with clear indications that infrastructure spending is significantly boosting non-oil sector momentum.

According to the Economic Development Board (EDB), the kingdom's gross domestic product (GDP) is seen growing at 3.6 per cent this year, primarily due to flat oil production, said a report in the Gulf Daily News (GDN), our sister publication.

Released yesterday, the Bahrain Economic Quarterly (BEQ) report for the third quarter last year says non-oil growth for the current year is likely to remain robust at 4.5 per cent.

The report estimates headline rate for next year at 3.3 per cent, with some deceleration in non-oil growth to 3.9 per cent along with a small 0.5 per cent gain in the hydrocarbons sector.

The EDB said the kingdom's third quarter GDP growth reached 5.1 per cent year-on-year, continuing the momentum from earlier last year and reflecting the positive impact of a number of significant infrastructure projects.

Overall growth for last year is forecast to have been in excess of four per cent.

The BEQ also highlights the resilience of Bahrain's non-oil growth.

This was particularly apparent in the construction sector, which experienced acceleration from 3.6 per cent annual growth in the second quarter to 12.3 per cent in the third quarter, making it the fastest growing sector of the economy.

The hotels and restaurants sector also posted strong year-on-year growth of 7.4 per cent.

The hydrocarbons sector in Bahrain has continued to expand throughout the year, with a 4.7 per cent year-on-year gain in the third quarter.

Looking forward, the BEQ said that the performance of the Bahraini economy in the near term is likely to benefit from a number of positive drivers, which should translate into robust near-term growth figures.

The build-up in infrastructure spending is set to continue, driven mainly by spending from the $10 billion Gulf Development Fund.

Initiatives are also underway to activate a number of significant priority projects that will draw on a range of funding sources, including private investment, the EDB report said.

The blueprint for the new government appointed in December includes a number of key initiatives ranging from the manufacturing sector to transportation and social infrastructure.

“In spite of increased volatility in the global oil markets, economic growth in Bahrain has remained robust with clear indications that infrastructure spending is significantly boosting the momentum in the non-oil sector, and serving as an important platform for continued resilience,” EDB chief economist Dr Jarmo Kotilaine said.

Globally, the structural growth drivers have not yet recovered to the point of strong, broad-based momentum, and the pattern of growth across various countries remains uneven.

The BEQ shows that growth dynamics across the GCC region continue to be characterised by strong structural drivers in non-oil economy alongside modest growth in the oil economy.

The resilience of the non-oil economy is further supported by healthy financial sectors along with a firm commitment by GCC governments to support economic activity and priority projects.

The report said that while the current bout of oil price volatility, along with the expected tightening by the US Federal Reserve, poses some risks in terms of business confidence and cost of capital for the kingdom.

However, the EDB considers the main near-term growth drivers as very resilient and the low loan-to-deposit ratios of retail banks suggest that the cost of capital is unlikely to be the main constraint on lending activity for now.

Investor and consumer sentiment should benefit from significant continuity in the non-oil sector, which should support regional tourism and investment flows.

The regional governments are likely to redouble their efforts toward economic diversification which should continue to create new opportunities for Bahrain-based companies, the report said. - TradeArabia News Service