Global Arab Network | Looking up – Bahrain expecting economic growth of 5% in 2012

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Looking up – Bahrain expecting economic growth of 5% in 2012

Global Arab Network - - Reda Darwish

Friday, 16 December 2011 10:57

http://www.english.globalarabnetwork.com/images/stories/2010/MAY/bahrain_business.jpg

Global Arab Network - After some difficult months, Bahrain’s economy has returned to growth and looks set to accelerate in 2012. While concerns remain about the international climate , public investment and renewed private sector activity are having a positive effect on the country’s economic health.

The Kingdom is expecting growth of 5% next year, Sheikh Mohammed Bin Essa Al Khalifa, the chief executive of the Bahrain Economic Development Board, told the international press in late October. Al Khalifa said that the government’s stimulus spending, plus financial support from the GCC, would contribute to economic expansion. The GCC has pledged $10bn over 10 years to support the state’s economic and social development policies, including the building of housing to address the current shortage.

Al Khalifa added that local business representatives and officials were intensifying their promotion of the country as an investment destination, taking steps that have included visits to the UK, US, France, Italy and Germany. In mid-October, for example, Al Khalifa was in the UK, encouraging British firms to invest in Bahrain. He highlighted opportunities in sectors that include infrastructure, construction and manufacturing.

The economy is expected to expand by between 2% and 3% in 2011. This muted growth has been attributed to an uncertain global economic outlook, as well as the effect of social unrest in Bahrain and elsewhere in the Middle East earlier this year. However, despite the slowdown, unemployment remains low, below 4%, the Bahrain News Agency reported in November, and the economy is now picking up.

Public spending, which is particularly focused on the development of infrastructure, will likely boost the economy. Major projects include a 40-km causeway to Qatar and road improvements to ease Manama’s chronic traffic problems. Some BD14m ($37m) in infrastructure projects were awarded in July and August alone. Considerable investments are also being made in new mixed-use property developments around the capital, as residents look to move to less crowded areas with more modern accommodation and amenities.

International press reports suggest that business activity is picking up in the fourth quarter as stimulus measures feed through to private sector demand. There is also confidence that Bahrain can maintain, if not enhance, its position as one of the region’s leading financial centres – an integral element of its economic diversification programme, which aims to reduce reliance on hydrocarbons exports.

Speaking at seminar entitled “The Resilience of Bahrain’s Financial Sector”, held on November 2 in Manama, Ashraf Bseisu, the CEO of Solidarity Group Holding, a major Bahrain-based provider of takaful (sharia-compliant insurance), said that the Kingdom was well-placed to develop its financial services industry in the wake of the global financial crisis. He added that the country should focus on growing segments such as Islamic finance. “We need to look at niche markets and continue to develop as the leading centre for Islamic banking and insurance,” he said.

Home to the world’s first Islamic financial centre, Bahrain has a deserved reputation as a leading player in the field, several speakers noted. Furthermore, opportunities for growth exist regionally, internationally and indeed domestically – the ongoing residential construction programme is expected to offer considerable potential for housing finance.

As indicated by the significant amount of public investments that are being carried out, the government is aware of the importance of keeping the economy moving in an uncertain global climate while addressing issues of concern to Bahrainis and international investors alike.

While Bahrain has been one of the world’s more open and liberalised economies for some time, the Kingdom fell slightly in the World Bank’s 2012 Doing Business overall ease-of-business rankings, from 33 to 38, out of 183 countries. In an October 23 column reviewing the results of the World Bank report, Bahraini MP Jasim Ali urged the GCC countries to continue carrying out reform measures that would likely improve their future rankings. Given its proven history as a reformer, Bahrain should not find it too difficult to make further improvements to the business climate, which would strengthen its efforts to attract international investment. (OBG)

Global Arab Network

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