The Kingdom of Bahrain Economic Outlook for 2015 by Jolito Ortizo Padilla

The Kingdom of Bahrain 2015 Economic Forecast

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 Bahrain economy will continuously have a robust expansion in 2015. Growth will overshoot as forecasted to between 3.5 percent to  3.8 percent with expectedly high government spending, low inflation rate of 2.5 percent and related monetary tightening due to reduce oil prices.

Update to the annual economic publication, Asian Development Outlook 2014, Padilla, J forecasted a growth in Bahrain’s Gross Domestic Product (GDP) to 3.5 percent to  3.8 percent compared to 3.0 percent in the previous year of 2014.

“Bahrain’s consumption and investment for 2015 will remain strong as exports will be recovered by non-oil sectors due to government’s focus to industrialization”, said Padilla. The government is gearing to accelerate infrastructure projects, undertakes a measurement to strengthen competition and increase access to financial activities which can give rise to growth and reduce unemployment.

An initiative to strengthen competition is being launched by the government, enhancement of the framework that regulates the public-private partnership, developing the capital markets that can increase financial activities. These initiatives by the government can raise the competitiveness of Bahrain, supporting the development of the small and medium enterprise, increase the investment in outlaying areas especially in Seef and economic zones thereby fostering economic integration, Padilla, J, (2014).

The slightly lower growth is due to political instability brought about by conflicts in some issues, foreign intervention to the country’s domestic affairs and the last quarter slump in the price of oil. The economy grew by 0.9 percent in the first half of 2014 as compared to 0.4 in the same period in 2013. The election of the Parliament last November of  2013 will produce growth that encourages investors and speculators to invest in the country, but also a cautionary reflection among the  government agencies about the misuse of fund.  The outlook assumes steps and mechanisms in order to address the administrative bottlenecks that accelerate fiscal disbursement from the late 2014, Padilla, J, (2014).

Private construction, while moderating a fast pace at present year, is forecasted to expand through the year 2015 by 12.3 percent. Building permits increased 10.5 percent on a year to year basis in the third quarter in both the non-residential and residential increased in approvals.

There is a consistency in the export of oil, although there is the reduction of oil prices slump to $48 per barrel. Goods exported specifically in the textile and aluminum industry has reversed in the second half of 2014 to a projected turnaround of 9.5 percent in volume. The importation of goods and services will continuously rebound at the higher rate of 11.8 percent in 2015.

Foreign direct investment, however low as compared to other GCC countries jumped by 65 percent in the second half of 2014 to $4.5 Billion( Bahrain Economic Board, GDN,  December, 2014) The GA  Consultancy Surveys shows that the business sentiment is generally positive.

 The Fiscal Policy is more receptive and supportive as expected in the economic growth of 2015. The Government’s proposed budget of 2015 increased the public spending by 13.5 percent over 2015 as proposed in the Government Action Plan (GAP). The increase will trickle down for infrastructure, social services and welfare, investment on tourism, agriculture and manufacturing.

Despite of the fact, that Bahrain’s growth is on a moderate pace since 2013, the generation of job is insufficient. Underemployment remains 6.8 percent in the year 2014 although substantially reduced as compared to 2013’s 8.9 percent. This is due to the frictional employment among Bahrainis and a structural employment among expatriates. A stronger financial and manufacturing sectors- which presently provides  10 percent   of its total employment with the further tourism expansion and other service industries, would generates job creation and better jobs. GA Consultancy forecasted an average inflation rate of 2.8 for 2015 lower than expected.

References:

Bahrain Economic and Development Board, Daily Gulf News, November 18, 2014 issue

Ministry of Labor Data, Daily Gulf News, October, 7, 2014 issue

GA Consultancy, Asian Development Board, 2014, volume 213, pp 24, 25

Jolito Ortizo Padilla , GA Consultancy, Asian Development Board, 2014, volume 197, p18