Global Arab Network | Bahrain avoids recession and posts growth

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Bahrain avoids recession and posts growth

Wednesday, 21 October 2009 17:58

Though activity in Bahrain's retail sector may have slowed due to the global financial crisis, the cash registers are still ringing as the economy seems set to avoid recession and post growth this year.

The past decade has witnessed the face of the retail industry get a radical makeover, with the shift away from stand-alone stores, more traditional bazaars or small shopping centres to large-scale malls in urban areas.

Thanks to a highly concentrated population, with more than 90% of those living in Bahrain residing in the country's two main urban centres - Manama and Al Muharraq - retailers have been able to focus on their markets, rather than having to spread their operations across a wider area to obtain high footfall levels.

This concentration of major outlets also brings with it another advantage. As tourism is one of the main contributors to the retail sector - with the vast majority of foreign visitors coming from neighbouring Gulf states - tightly focused retail areas mean tourists can spend their cash quickly, without having to spend time travelling between far flung shopping centres.

Thanks in part to the continued flow of tourists, in particular from Saudi Arabia, Bahrain's retail sector should enjoy measured growth for the next four years, with total sales rising from the $4.3bn recorded in 2008 to $4.8bn in 2013, according to a recent study by economic analysis firm Research and Markets.

One reason Bahrain's retailers will be looking to overseas visitors is that the Kingdom's own population is expected to remain around current levels for the next few years - the less vibrant economic conditions meaning fewer foreign workers coming to or remaining in Bahrain.

Broader policy issues may also impact retailers' bottom lines. Calls by the IMF for Bahrain to cut state spending by reducing subsidies, as well as the introduction of a more broad-based tax system to offset a dependence on hydrocarbons, may not be welcomed by the Kingdom's retail sector.

Any measure that could reduce the spending power of customers, either through requiring Bahrainis to pay more for stable goods or higher tax rates, would result in less disposable income available for non-essential shopping and entertainment, the backbone of the retail sector.

According to the IMF's latest report on Bahrain, released in early September, prudent macroeconomic policies and strong financial oversight have contributed to the Kingdom's robust performance in the face of the global downturn, with the economy forecast to expand by 2.6% this year.

While the Bahrain economy may be set to expand, consumer confidence is somewhat less resilient. The most recent Bayt.com/YouGov consumer confidence survey, which covers the three months up to the end of May, shows that though there had been some improvement in sentiment, it was still below a positive response.

Though growth in the sector may have slowed, and consumer sentiment somewhat bruised by recent economic storms, new investments have not dried up.

In late August, Bahraini lender Eskan Bank and real estate firm Seef Properties announced a joint venture to develop a $66.3m shopping complex in the Saar district. Unlike many of its predecessors, the new mall will be outside of the main built-up regions, with its developers looking to take advantage of Bahrain's future urban sprawl rather than add to the congestion of the existing market.

Sabah Almoayyed, the general manager of Eskan Bank, said the project, scheduled to be completed within two years, would help promote economic development and provide job opportunities in residential areas.

"The idea behind establishing this shopping complex is to respond to the continuous demand in that area, especially since Saar is one of the new places that is undergoing noticeable economical progress," she said.

With limited space for new developments, and the retail sector nearing saturation point in existing urban and business districts, it is understandable that those looking to invest in the sector will look to when the economy picks up and consumers regain their confidence.

Global Arab Network

This article is published in partnership with Oxford Business Group

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Last Updated on Thursday, 22 October 2009 13:20

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